The Downside of Debit Cards

Comments (scroll down to add your own):

1. Enterprise and Budget car rental companies both do this; for Enterprise, the hold is a flat $250 (from the sign in a local office) and Budget uses a formula to calculate it. Either way, it’s annoying, especially for those of us who don’t carry credit cards..

   Comment by wes m — May 8th 2007 @ 8:45 am

2. IMHO, the biggest downside to debit cards is related to this post: errors affect your real bank balance immediately. With CC I can dispute charges, and anyway have 25 days of “grace” before I have to deal with it. Nothing would infuriate me more than having to camp out at the local branch because checks started bouncing due to fraud or merchant dispute.

   Comment by Pretty penny — May 8th 2007 @ 9:32 am

3. Wow…I never use my debit card, but if I did, I wouldn’t stay there.

   Comment by Blaine Moore — May 8th 2007 @ 9:36 am

4. This happened to us on our way back from the Frozen Four NCAA hockey tournament. My wife was told by the hotel manager that they would “charge” an extra $150 to her account for a deposit and incidentals. We were told the charges would be removed in 10 BUSINESS days. We weren’t too excited about her money being held hostage for two weeks, so we opted for the credit card.

   Comment by shouldbeworking — May 8th 2007 @ 9:49 am

5. Something like this happened to one of my tenants recently. They stayed at a hotel for the weekend and were double-charged, with the money coming from their debit card. This was after they had written a rent check to me. I never understood if this was just an error, since the double amount seems like a lot to be holding for “incidentals,” or if it was a policy thing. Either way, it was a couple of weeks till they got the money back. They had to scramble to cover the rent check because I had already deposited it.

   I haven’t come up with a reason to use a debit card. I got one earlier this year with rewards points attached to it, thinking I could use it at the one or two places I shop that don’t take credit cards, in an effort to get cash back on just about everything I spend money on. However, after using it for a couple of months, I found out that you don’t get points when you use it at a place where you have to put in your PIN, only non-PIN purchases. Does anyone know the logic behind that? What difference does that make?

   Comment by bonnie — May 8th 2007 @ 10:42 am

6. i had funds held hostage on my debit card last year… a hotel in Vermont held 200 for “security” i didn’t get it back for 2 weeks and i wasn’t even notified they would be doing it at all… made me so mad

   Comment by jos — May 8th 2007 @ 12:38 pm

7. A couple of thoughts. I use my debit card for any and all transactions. I also get points for my debit card purchases and don’t input my pin number, 99% of the time you can hit cancel if the machine asks for your pin number, to use the debit card as a ‘credit card’. My debit card has a Visa logo and some credit card protections (i.e. I’m only resposible for the first $50 if the card is stolen). I’ve run into a few glitches when using a debit card for travel - most of the time I avoid rental car, airline, hotels, etc. that treat my debit card differently than a credit card (i.e. holding and refunding money, etc.) I do have a credit card that I can use for travel purposes and also use for business travel expenses.

   Comment by Sam — May 8th 2007 @ 1:14 pm

8. A similar issue to watch out for with debit cards is holds for pay at the pump gasoline transactions. Typically when you swipe your card at the pump (debit or credit) it authorizes the card for a relatively high amount (anywhere from $50 to $100) since they don’t know in advance how much gas you will pump. When you finish pumping they will put through a charge request for the actual amount, but the original authorization will typically stay on the account for a couple of days before being canceled. If you used a credit card it is no big deal (unless you are right at your credit limit), but on a debit card it can cause real issues. Because the bank still thinks that your account could be drafted for the amount of the authorization, those funds will be held until the authorization is canceled. If your balance is low, that could mean other items coming through on your account could be returned for insufficient funds since the held funds aren’t part of your available balance.

   I am very anti-debit card. This whole debit card thing just seems like a way for banks to shift the risk from themselves to their customers.

   Comment by BillyOceansEleven — May 8th 2007 @ 3:52 pm

9. Around here I have never found a station that authorizes $50 or more when pumping gas. They authorize a dollar, then the real amount goes through a few days later. I only use my credit card when traveling, so I do not know if stations in other parts of the country do this.

   Gas stations at grocery stores, I have found, do not put a hold on your money. They just charge you for the full amount that you pumped.

   Hotels and car companies have always held money like this. The debit transaction takes a week or more to be refunded. You can always reserve/hold the room/car with a credit card and pay with debit after you have the final bill.

   That particular hotel might have been different (as in charging your debit card extra even if you are checking out and are paying the final bill - not sure from the article). Fortunately these days it is a piece of cake to just let them run the credit card and transfer the amount from your checking account to the CC when you get home. I only use credit cards when I travel, never my debit card.

   Comment by Chris — May 8th 2007 @ 5:06 pm

10. This happened to me with Enterprise (Greensburg, PA) as well, but it wasn’t a flat $250 fee. Mine was calculated for a 15 day period for $167 (give or take), however I used a credit card instead of a debit card. I have seen this practice at Dollar RentACar (Las Vegas) as well. The holding fee was $300 (give/take)!! I used my debit card at Dollar. Strangely enough, both places took the money and refunded it to my account within 2-3 days, and then ‘officially’ charged me when I returned the car.

    Car Rental Tip: If you are in Las Vegas, Payless Car Rental is a good company. Their rates aren’t bad. But what made me happy is that I forgot to fill the gas tank when I returned the car. The lot attendant didn’t charge me for the 10 missing gallons (@4.50/gallon). So, no fuel surcharge if you are polite when you return your car and have a good attendant!

    Comment by BigD — May 10th 2007 @ 4:06 pm

11. I work at a hotel and we have a NO Debit card policy. The reason that we do this is because of our register/reservation system.

    The register software was written before debit cards became all the rage, so there is not option for debit or debit card detection.

    We did try to take them for a little while and the problem we incurred was multiple billings. If we authorized for $100 it would go through at the bank 4 times making the total held $400 The only way for us to know this happened is if the guest checked thier bank account.

    If it did go through multiple times this is what we had to do to get the extra funds released.

    1. Must be during bank hours 9-5pm
    2. Call the bank and get thier fax #
    3. Fax over a letter stating the guest name, some account info, the amount to release, all on company letterhead.
    4. And even after that it may take a few hours to actually show up in the account.

    So if this were to happen on a friday or saturday night the guest would have to wait until monday for thier funds. So think about 5 nights at $100 and then throw a multiple transaction on that amount $2000 is now bieng tied up. Now after that amount throw in overdraft fee’s etc.

    The reason the register system isnt upgraded immediatly Is because the entire register/reservation system needs to be updated which can cost over $50,000 in software, hardware and information transfer fee’s.

    We do not accept them to avoid this type of situation and dont want to ruin thier visit by holding all thier money. All buisnesses have the option of what forms of payment to accept. Some places are cash only, credit only, no personal checks, So why not no debit.

    Comment by michael — May 17th 2007 @ 7:39 pm

12. Banks and overdraft fees. I found out the hard way. In my opinion the main reason that overdraft charges occur is the way that the banks computer processes charge transactions, when you use your ATM/debit card (visa or MasterCard) as a charge card. I’ll explain why.
    Let’s say you have 100 dollars in your account and you go to your local Mall and make a purchase for 40 dollars and use your ATM card as a debt card (charge card) against your checking for the transaction, well, you should have 60 left in your account, right? You would think so wouldn’t you? You start with 100 charge 40, 60 left right? The next day you go to the ATM to make a withdrawal it says you have 60 dollars available, right, ok you take out 50,you should have 10 left…. Right? 50 40 =90, you started with 100 - 90 = 10 left right?
    Wrong, you just triggered an overdraft when the transactions hit the bank computer that night, according to the banks computer, the 40 that you charged for the purchase the day before was a charge card transaction, even though they deducted the money from your available balance right away, there is still going to be a hold of 40 dollars against your account until the 40 charge transaction clears the banks computer which takes about 3 to 4 days and the hold drops off your account.
    So even though the ATM says you have 60 available, which is what you have left in your account, any withdrawal over 20 will trigger an overdraft charge, until that 40 dollar hold gets cleared and dropped from your account. Why? When the transaction hits the bank computer that night. It sees the 60 that you have, but, it also sees a 40 hold on the account for the charge transaction that hasn’t cleared yet, so effectively until that hold drops from you account the banks computer will automatically kick out an overdraft fee for any withdrawal above 20 dollars.
    That’s right folks when you use your ATM/debt card (visa card/MasterCard) as a charge card the bank is putting a hold for the amount of the charge against your account, even though they have already adjusted your balance for the amount of the transaction …That’s right, THEY HAVE A HOLD ON AN ALREADY ADJUSTED ACCOUNT BALANCE, AND THAT HOLD REMAINS UNTILL THE CHARGE TRANSACTION CLEARS AND THE HOLD DROPSOFF YOUR ACCOUNT.
    I don’t know if your banks computer is set up to figure transactions this way, but I know of 2 that do, I had an account with one of them for years and never had a problem with my account until I got their new ATM/debt MasterCard and started using it as a charge card. That’s when I started to have problems and overdraft charges. I finally figured out what was happening and brought it to their attention, about what was triggering the overdraft charges and got into a long heated discussion with them about it. I got the overdraft charges back, after going over line for line on their computer, and proved that I had the money in there, it was just the way that the computer interpreted the hold against the already adjusted account balance that was causing the problems, It was a very hectic undertaking because one mistaken overdraft charge on the banks part can start a chain reaction of overdraft charges. After everything was said and done, I had to change banks.
    So, to some this up, I’ll bet if you have had problems with overdraft charges and you can’t figure out why they’re happening, It’s because you used your ATM/Debit card as a charge card. Your first clue will be, when the bank official sits down with you to go over your account to try and explain the charges, if you hear them start talking about hold amounts against your account because of charge card transactions that haven’t cleared yet bend over because your being screwed.
    Never Use Your Debt Card As a Charge Transaction unless you keep a big balance in your account.

    Comment by Phil — Dec 8th 2007 @ 8:12 am

13. My family just took a trip for Christmas and checked into the hotel with our debit card. Our final bill for the hotel would be $875 for a three night stay and the Hotel put a hold for $2300 on our account. We checked in on Dec 23 and did not find out about it until about 9:30 Pm Christmas Eve and there was nothing that could be done about it until Dec 26th. They had a sign at the end of their check-in desk but had four agents checking guests in. There is no way that you could see the sign, and the agent that checked us in did not mention it to us. The sign clearly stated that $100 per day would be held but their system held $100 per day and another $100 per person, it was 2 adults, 15 yr, 8 yr and 18 mon old. I was livid and insisted that they fax the bank immediately to relese my money. The bank even commented that the amount was outrageous given what the amount of our final bill was.

    Comment by Ann — Dec 31st 2007 @ 9:23 am

14. It has happened to me a couple of times, mostly with my debit card. I was on a trip to a convention and I showed my debit card (as per hotel requirement) in case I wanted to use the premium channels or mini bar. I didn’t use either so I wasn’t charged.

    I get home to see my bank account at -400 dollars. The hotel had charged my debit card for our room expenses instead of the school that I was representing. They denied that they ‘billed me’ rather they were ‘holding’ the money as you said for 7-10 days. I was flat broke but my bank was nice enough to not charge an overage fee and my school worked with the hotel to get it fixed quickly.

    Lately I’ve noticed more and more companies doing this money ‘holding’. Apple Inc is ‘holding’ 130 of my money until I get a replacement part for an under warranty computer. I recently updated my billing info on a number of services I use and most took a 1 dollar ‘verification’ hold on my credit card which is fine, but one company took 20 dollars for 10-15 days!

    Overall I’ve noticed they do this far more with debit cards rather then credit cards but what really irks me is that many of these companies outright lie when asked if they will charge your card. To them it isn’t a charge or a payment to them, just a ‘hold’. But I think it just makes it easier for them to lie later and say that you didn’t follow through with an agreement and now they can keep your money.

    Comment by jared — Jan 25th 2008 @ 11:13 am

15. That same thing happened to me tonight, I actually got gas for a friend of mine, 29.19 or something. THEY put a 90 hold on my checkings account, which is totally stupid because they really should set it up so it takes out just what you authorize. The morons over at VISA were rude, but they at least explained that to me that pumps will do that to make sure that you have the funds in your account in case you get that much. Which doesnt make any sense as well. Although, it makes me really pissed cuz it looks like a huge fraud thing as well as giving me a small balance making me nervous about over draft fees and everything.

    Ugh, I HATE BANKS.

    Comment by Tia — Aug 14th 2008 @ 4:16 am

16. UNIQUE PROBLEM! or so it seems.
    Purchased a computer at WalMart with a Debit card. Swiped and PIN’d the VISA debit card and an ‘Insufficient Funds’ was returned. The account had the funds. With that transaction, my CU account was debited the $323.63 but WalMart was NOT paid.
    WalMart (and I) thought the transaction failed. I swiped and PIN’d again and the Approval gave WalMart their money. 4 days later I discover that I’m out $323.61. Went up in smoke. CU sez BOTH transactions were paid.
    All the WalMart data (I was there) sez the1st transaction was Not Paid.
    WIth CreditCard I’d be out $50 Max. With DEBIT card I may be out the whole $323.61.
    Something Wrong with this Picture!

    Comment by ed — Aug 21st 2008 @ 12:27 pm

17. Debit Cards vs Gas Stations….Many gas stations will charge your debit card twice the amount incurred at the pumps; keeping that fact that they want to make sure the funds are available and payable. They keep the funds for up to four days; so if you have low funds; you’ll be paying NSF checks coming in during that period. Now imagine that they are doing this to two hundred thousand people a day; say at 20.00 a whack.
    Who gets the interest on $ 4,000,000. kept for 4 days.
    The same goes for hotels who have been known to keep
    these funds for up to fifteen days; as the interest piles up; did they send you an interest bearing check; back??
    Answer: No; they keep your interest and all interest; its another way for your debit card to work for them; these hidden practices have cost Americans; 28,000,000 in NSF funds in one year!! Also made oil companies 177,000,000 in interest also in one year!! Its better to use a credit card or cash at the pumps; its better because you can afford to eat, feed your families. These are only two of the ways your debit cards work for big business; there are another 218 ways that are more sinister..Pay cash for gas.. Dave G.

    Comment by dave g — Oct 17th 2008 @ 3:31 pm

18. I bought the most expensive chicken sandwich, EVER!! Chik-Fil-A and SunTrust bank helped themselves to $195.21 of my money and there was nothing I could do about it.
    Put your debit card away…use cash and get a receipt. this will not happen to me again!!!
    Karen B.

    Comment by Karen Branum — Nov 12th 2008 @ 1:16 pm

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