If you're like most people, then you're probably using your debit
card for many everyday transactions such as shopping for groceries, paying
a restaurant bill and putting gas in your car. But many more merchants
are beginning to practice placing a "hold" on bank accounts
so that they can insure that they can get their money. For a debtor exiting
bankruptcy, who is on a tight budget with a place for every dollar, these
holds can create a tsunami of overdraft fees.
What is a debit card hold? A hold is a practice which authorizes a certain
amount of money on a debit card. For example, a consumer might make a
purchase for $20, but the merchant requests an authorization of $100 from
the bank. The bank puts a hold on the consumer's bank account for
$100 making that money unavailable. The hold remains in place until the
merchant clears the transaction by submitting the exact purchase amount
or until it falls off which can take one to three days usually. The problem
that some post-bankruptcy debtors face is that they don't have enough
cash available to cover the hold. If the debtor only has $90 in their
bank account when a $100 hold is placed on their account, the hold could
trigger overdraft fees. And this is especially troublesome for someone
trying to repair their credit after bankruptcy.
So how can a post-bankruptcy debtor avoid debit card hold problems? The
best way to avoid this type of problem is to pay for purchases with cash
instead of a debit card.