down a hole?

August 4, 2005 12:24 PM

What happens to the money when a business places a hold on your credit/debit card?

Currently I am doing battle with a hotel to release a hold they have on some debit card funds. The bill has already been settled but near a month later there is still a $300 hold on my acccount.
My question is, especailly with debit cards, where does the money go when it is being held? I would hate to think that it is gaiing intrest in some account, (and don't think it really is). But this holding funds past the point of the bill being settled strikes me as suspicious in some way, even it if is just a day or two, much less amonth.

To try and head off speculation (I can speculate pretty good), please only respond if you know whats going on.

thnaks

posted by edgeways to Work & Money (14 answers total)

It is gaining interest, for the bank at least. If it is in an interest-bearing account, you should be getting interest as well, unless your bank's terms and conditions say that interest is calculated only on available funds. The merchant is not getting any interest.
posted by grouse at 12:49 PM on August 4, 2005

It is gaining interest, for the bank at least

No, it's not. Let's say you have a credit card with a $1000 limit. You charge $600 to it. In addition, a merchant places a $300 hold against the card. The hold doesn't actually move money; it simply reserves money. Think of it as lowering the credit limit: at this point, the cardholder can charge only $100 more. It's as if the credit limit were reduced to $700.

Reserves/holds are perfectly normal - for example, when you rent a car, you don't pay until you return it, but the car rental company places a hold on your credit card to make sure that there is money still available on that card (say) a week later when you do return the card.
posted by WestCoaster at 1:10 PM on August 4, 2005

The money is on "hold" in YOUR account. The diference will show between the "current" and "available" balances -- current being whatever's in the account, and available being that amount minus this hotel hold and whatever else you have outstanding on the debit card (ie, anything else similarly held). Generally the hold will expire after a set amount of time, and that amount of time will vary depending on a number of factors.

First thing to do (and this is probably obvious) is talk to your bank. What do they need to remove the hold? A letter from the merchant stating that it's ok to release the funds? If so, then the hotel just needs to send a letter (or fax) to the bank stating that charges in X amount from X date are to be released because you've paid them already.

Given that you say you're "battling" with the hotel, I'm not sure that will work, but it's generally a good strategy. Why is the hotel reticent? In this amount of time, they should have proof of payment already. Maybe a conference call with hotel, you, and the bank will clear up something for the hotel and make them better able to help you.
posted by Medieval Maven at 1:24 PM on August 4, 2005

No, it's not.

Yes, it is. The OP asked "especailly [sic] with debit cards" and is talking about an issue with his debit card. With a credit card, you are right, no one makes any money off a hold.
posted by grouse at 1:50 PM on August 4, 2005

Hmm- your bank is definitely the place to start, not the hotel. A pre-authorization hold (through a Visa/MC branded debit card, I'm assuming) should only last for 3-7 days, at the most, before the bank ages it out and returns the amount to your available credit line. If it's been over a month, either something's seriously wrong with their credit card processing, or there's some other, more recent, hold that's been placed on your account.

As for the hotel- there's really not much they can do. The only thing they can actively do with the preauthorization is to actually process a deposit for some amount on it - there's no 'release auth' concept in system.
posted by bemis at 1:51 PM on August 4, 2005

The hotel does not get your money until they charge your account. A hold does not give the money to the hotel.
posted by raedyn at 1:57 PM on August 4, 2005

Response by poster: The battle is really one of contact. I have called numerous times, and have been told i have to speak with a manager, but that she is busy or out to lunch or... So I leave a message but there is no call back. It is a national chain, so then I call the national number, but they are useless beyond being able to "lodge a complaint".

this debit card account was set up just so I could use it for 3 weeks on vacation then cancel it, now I want to x it out and receive the remaining money back, as I have something I need the cash for. But, as indicated above this is not turning out to be as easy a process as one would hope.

Guess in the field of emoney money is virtual and doesn't have to be spent to be "not there".
posted by edgeways at 2:09 PM on August 4, 2005

The hotel can't do anything, really. Call the bank or whoever it is that administers this card. They do this all the time.
posted by Lyn Never at 2:43 PM on August 4, 2005

Up to about a year ago, I was a desk manager at budget hotel and dealt with this issue almost daily. The notion of pre-authorization is not familiar to many people who are used to walking out of Target with a charge slip for the exact amout of purchase, be it credit card or debit. Target already knows what your tab is; a hotel can only speculate. The most common situations where this becomes an issue are when a guest checks out early (plans on a week, stays two nights) and when a guest settles in cash. (Oddly, some people would actually check in using a debit card and still want to settle in cash, in effect doubly depleting their cash resources for an average of five days.) I seldom had a problem in phoning the cardholder's bank (I typically had to get a contact number from OUR bank's merchant service desk) and asking to have the credit hold cancelled or any unneeded excess released. I've had to phone over as little as $20.00 in excess authorization for someone who needed the money to buy gas to get home. (I shouldn't mention the time I mis-keyed an authorization for $100.00 as $10,000.00; I probably locked up most of an Israeli tourist's credit line for his vacation in California, but, after phoning his bank in Israel, the mistake was corrected without his ever knowing about it.) I could have simply said that your bank alone sets the terms of pre-authorization, but the hotel, when it feels some heat from the cardholder, can certainly help.
posted by namret at 2:53 PM on August 4, 2005

Yeah, assuming you and the hotel are cool that you have settled any money due to them, forget talking to the hotel and focus on your bank. I'd advise going to a branch and talking to a real person, rather than doing it over the phone.
posted by Rock Steady at 3:17 PM on August 4, 2005

The hotel can definitely fix the problem and it is their problem. The problem is that it takes one of their people looking through their records and then talking to their credit processor and that takes someone's time and energy. They've already got their money (I assume) so fixing this problem gains them nothing. Most authorizations time out after a set period or after the actual charge is run on check out so they can just ignore your problem and it will go away. The month long hold means that someone probably messed up when checking you in. Most places will set the hold to time out in X days if you're checking in in X days.

Try talking to the front desk manager at the hotel and explaining that you haven't been able to get any resolution. It the manager's job to make soothing noises at you but he or she might know the right person to get moving on the problem. Otherwise I guess I'd talk to your bank because as I said the hotel doesn't have a financial incentive to actually fix your problem.
posted by rdr at 3:59 PM on August 4, 2005

I forgot to mention one thing. Join the chain's frequent stayer program before calling the manager and mention that you're a member while you're talking to her. Hotels will give different levels of service to different classes of customers and joining the frequent stayer club will give a bump up in the service hierarchy.
posted by rdr at 4:08 PM on August 4, 2005

Yeah, I work in banking, and we deal with this stuff a lot. It's entirely possible that the bank and the hotel are going to have to get together to settle this. But, it's also possible that the bank's Visa Check Card/ATM Card/ General Card Services department will be able to figure out the error without the hotel's involvement -- it just depends on the bank to some extent.
posted by Medieval Maven at 5:30 PM on August 4, 2005

Response by poster: Finally got it fixed, which involved filling a formal compaint with the national head office, THEN I got a call from the hotel, who finally faxed a release to the bank. Guess I won't be staying there again.

thanks for the info
posted by edgeways at 10:38 AM on August 5, 2005