A debit card is directly connected to a specific account at a financial institution, and you can use the card to make purchases, similar to a credit card. A debit card may have a Visa, Discover, American Express or MasterCard logo, which allows you to purchase items using the funds in a checking or savings account. Depending on the nature of the transaction, the bank could place a pending hold on account funds prior to releasing the funds.
Upon opening a checking account with a financial institution, the bank may issue a debit card to you, allowing you to make purchases with companies that accept debit cards with credit card logos, and to make withdrawals at ATM machines. Some credit unions and banks also offer debit cards with credit card logos in connection with savings accounts. All available funds in your account may be used to transact business with your debit card. Any purchases made with the debit card will be accepted and paid by the banking institution when the necessary funds are available in your account for your use.
An account hold is placed by the financial institution. Thus, a pending hold on a debit card transaction denotes that the funds are awaiting approval by the bank for a specific amount to be available for your use or paid to a merchant. The banking institution determines the time frame for the hold. Account holds may be placed on check deposits and funds for purchases that you recently made.
Your debit card has a unique payment card number, which is electronically linked to your bank account. When you swipe the debit card at a store or use this number from the debit card to make purchases or pay bills online, the company uses a merchant account to process debit card and credit card transactions. An electronic authorization is sent for approval to your bank, and the transaction is either automatically approved or preauthorized when the card value includes an available amount to cover the transaction. When you use your debit card PIN to make a purchase, the process is akin to making a withdrawal at an ATM. No pending hold is placed on this type of transaction.
When your account indicates there is a pending hold on a transaction, the transaction has been preauthorized for a certain amount that was submitted to the bank by the merchant. If you choose "credit" when you swipe your card at a store or restaurant, the financial institution may preauthorize the purchase and place the funds in a pending status. The amount needed to cover the pending transaction will not be available for you to withdraw or to use to make further purchases. Some merchants -- typically hotels and rental car companies -- might submit an amount for preauthorization that is higher than the actual purchase. The higher amount covers any additional charges that you might incur while you use the merchant's services. When you complete the transaction, any amount that is higher than the actual purchase plus additional charges will be refunded back to your account.
- State of Maine Bureau of Financial Institutions: Debit Card Holds
- Consumer.gov. "Using Debit Cards." Accessed July 16, 2020.
- Federal Trade Commission. "When a Company Blocks Your Credit or Debit Card." Accessed July 16, 2020.
- Element Federal Credit Union. "Debit Card Holds and Issues Explained." Accessed July 16, 2020.
- Consumer Financial Protection Bureau. "A Closer Look: Overdraft and the Impact of Opting-In," Page 1. Accessed July 16, 2020.
- MyFICO. "What Is Amounts Owed?" Accessed July 16, 2020.
- Federal Trade Commission. "Lost or Stolen Credit, ATM, and Debit Cards." Accessed July 16, 2020.
Marie Huntington has been a legal and business writer since 2002 with articles appearing on various websites. She also provides travel-related content online and holds a Juris Doctor from Thomas Cooley Law School.