Getting a 'hold' on your credit/debit card
|  Dear
Dr. Don,
When a bank places a "hold" on your funds when
you use a debit card or credit card (a credit card -- Visa in this case), what
is the minimum period of time they will hold the funds?
My particular institution has the annoying habit of releasing these
funds after three days. Then the firm where I charged a purchase
comes back 10 to 12 days later and sucks the funds from the account,
playing havoc on daily balances --I account for the outflow, then
it's back, then it's gone again.
I'm wondering if Visa
(merchant services) or banking laws have any requirements in this space.
--
Andy Albatross
 Dear
Andy,
You're a bit unusual in complaining that the hold is released
too soon. The typical complaint is that the hold stays in place for too long. Service
providers such as hotels, car rental companies and even your local gas station
put a hold on your account based on the expected bill in order to lock in the
credit capacity or funds available to pay that bill.
It sounds like you're managing your finances a bit
too closely. What I mean by that is a hold isn't a charge,
it's a placeholder reserving credit capacity or funds availability
when the charge actually goes through on the account. If you're
bumping up against your credit limits because of holds, you should
consider talking to your card provider to raise that limit.
I
spoke with a public relations manager working for Visa USA and he passed along
this statement by Rhonda Bentz, a vice president with Visa USA: "Visa
does not issue cards and, thus, does not place holds on cardholder funds. The
financial institutions that issue Visa cards decide whether to place holds on
cardholder funds. Some card-issuing financial institutions, in order to protect
themselves against the risk that cardholders will spend more money than they have
in their accounts, place a hold on funds in anticipation of the final transaction
amount. To help ensure that holds do not disrupt cardholder access to the
funds in their accounts, Visa requires that card-issuing financial institutions
release all holds within three business days of the authorization request or when
the transaction clears, whichever is earlier."
It's Visa's
three-day rule that releases these holds on your account, even if the charge hasn't
gone through yet. If you've noticed that a particular vendor is the problem
child when it comes to posting charges within that three-day window, then talk
to that vendor about their posting practices. You're not paying
finance charges on blocked funds on your credit card. Your merchant agreement
with the financial institution that issues the credit card determines how the
average daily balance is calculated and the governing law is the Truth In Lending
Act that is overseen by the Federal Reserve Board as Regulation
Z.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."
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