What Is a Debit Hold?

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By Chris Blank
eHow Contributing Writer

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Many banks offer ATM cards that bear a Visa or MasterCard logo. These cards can be used much like credit cards, however, there are important differences between a debit card and a credit card. One of the most important differences is that the funds to cover a debit card purchase come from your bank account rather than a credit line, and merchants often use a debit hold to authorize purchases you've made with your debit card.

Debit Cards Defined

Debit cards are issued by banks to allow their customers to access the funds in their accounts without visiting the bank. You can withdraw cash directly from your account at automatic teller machines, or ATMs.
With cash withdrawals, there are no debit holds, because the money is immediately subtracted from the account. However, when you use a debit card to purchase services or merchandise, the transaction may involve directly deducting the funds from your account or placing a debit hold on your account, depending on whether the transaction was made using a personal identity number (PIN) or as a signature transaction.

Signature vs. PIN Transactions

For a PIN transaction, you enter the PIN at the point of purchase. The transactions is authorized or declined based on the funds in your account, and the exact amount of the purchase is deducted immediately.
With a signature purchase, the transaction is treated much like a credit card purchase, and the merchant attempts to obtain an authorization. However, the actual funds usually are not deducted right away. Instead, a debit hold is placed on your account to prevent you from spending the funds for something else, even though the money may remain in your account for several days after the purchase.

Debit Holds vs. Credit Authorizations

Debit holds are similar to credit authorizations in that both types of transactions place a hold on the funds that are available in an account. However, with a credit hold, the credit limit usually reflects the reduced available credit immediately, even though the transaction has not yet been finalized.
With a debit hold, your bank account may show a "balance" that is higher than the "available balance" because the "available balance" reflects the amount of the debit hold.

Reversing a Debit Hold

Reversing a debit hold can be problematic. For PIN transactions, because the money is deducted from your account right away, it is generally impossible to reverse a debit authorization. You must instead seek a refund, which is often returned in cash rather than redeposited in your account.
For signature purchases, you may obtain a cancellation from the merchant, but the debit hold may remain in place for several days before the funds are released back into your bank account.

Considerations

Some merchants may place a debit hold on an account that exceeds the amount of a purchase. This is common with restaurants, gas stations and hotels, which seek authorization based on an estimate of what the final purchase transaction amount will be. In such cases, the excess funds will not be available to you until the transaction has been completed, which can require several days.