The Downside to Debit Cards

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August 03, 2007 LITTLE ROCK Increasingly, consumers across the country are using their debit cards to pay for a number of goods and services, ranging from gas for their cars to school supplies for their kids. In fact, point-of-sale debit usage has grown by 40% since 2001 according to the Star Networks 2005-2006 Consumer Payments Usage Study. While debit cards offer more convenience than checks, there are potential pitfalls in the use of a debit card to purchase goods or services. Thus, Attorney General Dustin McDaniel issued this consumer alert today to warn Arkansans about debit card blocking, which occurs when a merchant places a hold on the consumers bank account in an amount larger than the amount charged on the debit card.In some transactions where the merchant does not know the exact amount of the sale at the time that the transaction is authorized, the merchant may place a hold on the consumers checking account for an additional sum of money. If the consumer has a low remaining balance in the checking account after the purchase, the hold may result in an unintentional overdraft, or may cause subsequent checks to be dishonored.These transactions, where the exact amount of the charges is unknown at the time of the authorization, include gasoline purchases at the pump, hotel rooms, and rental car agreements. In some cases, the hold is released immediately upon the completion of the transaction; however, in other cases the hold may remain upon the checking account for three days, or even longer. Attorney General McDaniel advised consumers to avoid using a debit card in transactions where authorization of the purchase occurs prior to the amount of the charge. In such situations, it is better to use an actual credit card, rather than a debit card or a debit/credit hybrid card, McDaniel said. Your account may still be subject to a block, but it will not cause an overdraft of your checking account or cause subsequent checks to be dishonored. If you have over-drafted as a result of debit card blocking, you may try to negotiate a waiver of the charges with your bank. However, the bank is not obligated to dismiss the over-draft fees, and consumers should think carefully before using their debit cards for the purchase of some goods and services.