Debit Card Use Can Yield Some Unwelcome Surprises

[Aug 7, 2007.]

Debit card use has exploded in recent years, with consumers turning to the cards as a convenient alternative to writing checks.

Still, although such cards offer numerous advantages, they are not fool-proof. If you find yourself close to your limit on your debit card, your bank may put a hold on your card, which can lead to additional problems.

These holds or "blocks," as they're sometimes referred to, can be larger than the amount of money you were actually planning to spend for renting a car or buying an airplane ticket. According to the Institute of Consumer Financial Education, many consumers are unaware of the holds until their debit card is rejected when they try to make another purchase.

The problem can be particularly acute when a consumer is on vacation and may have difficulty replenishing his or her bank account. A block will remain on the account until the final bill is paid.

The reason for blocks is simple—financial institutions want to make sure that customers have enough money to pay for goods and services. If you have questions about the practice, you might want to check out the Federal Trade Commission's website at www.ftc.gov for the latest information on blocking practices.

Meanwhile, credit card issuers say the blocking procedure enables merchants to offer consumers a number of special services, including paying-at-the-pump at gas stations and express checkout at hotels and motels. Credit card companies may also have regulations about how long blocks can continue. Visa, for instance, ends holds within three days of an authorization request or when the transaction clears.

Meanwhile, the U.S. Public Interest Research Group reports that consumers are becoming more aware of blocking procedures. The organization has expressed concern about the large fees assessed for insufficient funds on debit cards—a situation that can be exacerbated through the practice of blocking.

Julie Ann Amos
August 7th 2007

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