The Debit Card Block Trap

Over at Blogging Zoom, a user reported a problem using their PayPal debit card to buy gasoline. They found that a $76 block was placed on their account. (I’m not linking directly to their blog post since their blog doesn’t allow open comments). This is something that many debit card users aren’t aware of, blocks on their account when they make certain types of purchases.

The “Block”

When you pay for a car rentals, hotel/motel room or gasoline with a credit or debit card a block for what the merchant and the credit card processor have as a maximum average amount is placed on the account. For a fuel purchase this is usually between $50-$100. For a car rental or hotel room this might be several hundred dollars. They do this because the transaction isn’t complete until the final dollar amount is submitted. Having this extra amount reserved helps insure that any additional charges can and will be paid by the consumer.

The Problem

With a credit card, this blocked amount isn’t a factor unless you’re right at your credit limit. Even then, some credit card issuers allow a bit of leeway on blocks, assuming that if it goes over they can charge you an overlimit fee and so forth.

However, for a debit card, the block puts your money in limbo. You can’t access it until the final amount is processed through. Sometimes this is a matter of minutes but it can be a matter of days depending on how the charge is submitted by the merchant and processed by the banking system. 

The bad part of this is that not only can you not access your money, your bank may charge you for an overdraft as well. For example, if you have $1000 in your account and you rent a car using your debit card. The rental company puts a block of $500 on your account. Then you write a check for $600 for a purchase somewhere. You return the car and pay $200 for the rental. You should have $200 in your bank account right? Wrong! The bank shows that you have a balance of $500 when the $600 check arrives, leaving you with an overdraft of $100 plus fees.

You can fight these kinds of charges and even have blocks removed early in some cases but it is a hassle.

The Solution

You should avoid using debit cards for any purchase that might put a block on your account, particularly large blocks like hotel rooms and rental cars. If you must use one of these cards, ask up front how much of a block they’re going to put on your account. They should be able to tell you this.

If you want to use money in your bank account to pay for a rental or room, use your credit card to handle the block and your debit card to pay the final amount. No block should be placed in that case.

Do you have a debit card block story? Any thoughts on this practice? If so, please leave a comment.

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