Have you ever had a credit or debit card transaction declined for insufficient funds when you thought you had money in your account? You may have a credit or debit card “hold,” reserving funds that you haven’t spent.
Merchants and service providers set a credit or debit hold on a purchase when the total isn’t known at the time the card is run, and the item or service can’t be reasonably returned (for example, a tank of gas or a hotel stay). Holds are a cushion to cover possible final purchase amounts.
Consider pay-at-the-pump gas stations. When you swipe your card, the merchant can’t know if you’re filling a tank or just topping off – or how much gas your car holds. You may only have enough available credit for a few gallons but could fill the tank once the card is approved.
With a credit hold, station owners temporarily reserve enough of your credit limit to cover whatever the merchant designates as a limit – which may be far more than a full tank cost…