I worked for a major regional bank for over four years. Many people are confused or unaware of how their debit card works. When you use it to pay, the money usually comes directly out of your bank account. When everything goes smoothly, it’s great. It’s when things go wrong that a debit card can be a financial nightmare. Here are the top three misunderstandings most clients have about debit cards, the truth, and how to handle these issues.
No, the charges do not always come out right away
For the vast majority of debit card purchases, the vendor will collect quickly. After all, they want their money. But you must be aware that this is not always the case. I have personally seen instances where a merchant can take months to collect, causing overdraft fees, bounced mortgage payments, and financial wreckage to the client’s account. Reconcile your bank statements with your receipts and checkbook often. It is your responsibility to be cognizant of all outstanding charges and spend accordingly. If this happens to you, you have no recourse if the charge is valid, so be diligent.
No, you may not use your debit card for holds exceeding your available balance or have a hold dropped on your request
If you wish to rent a car or moving truck, the merchant will place a substantial hold on your card. This will tie up funds, sometimes for weeks. If you have 200$ and the hold is 300$, the hold will not be placed and you will be declined. However, if you have 305$ in the same scenario, you will be left with only five dollars to spend until the company removes the hold. Your bank has no jurisdiction to remove this hold unless they received documentation releasing it from the merchant. The funds were promised to that vendor and the bank cannot renege on that promise without the vendor’s request. Be aware of this with any type of equipment rental, and unless you carry large balances, use a credit card instead.
No, you may not dispute a pending charge
Unlike some credit card companies that can dispute a charge the instant it appears on your account, debit card charges must post before a dispute can be filed. If you see a strange charge in the pending section of your bank account, the charge may be in error and will be released as soon as the error is discovered. If the error posts into your ledger, you are only then free to file a dispute. This could mean a few days delay on releasing the funds back to you. This is one of the main reasons you should always have an emergency debit card or credit card available!
By keeping these truths in mind when you use your debit card, you can avoid all sorts of fiscal fiascoes including overdraft charges, bounced payments, and the embarrassment of a decline. A debit card is a useful tool, but it pays to understand it’s limitations.