What Is a POS Hold on Bank Account?
Learn how temporary Point of Sale (POS) holds impact your bank account and available funds. Understand this common banking practice.
Point of Sale (POS) holds are a common banking practice that temporarily reserves funds in a bank account. This mechanism ensures money is available for a transaction before it is fully processed. These holds are a routine part of many daily transactions, impacting your available balance. Understanding these temporary authorizations is important for managing personal finances and avoiding unexpected issues.
Understanding POS Holds
Point of Sale (POS) refers to the location where a transaction occurs, such as a retail store or an online payment portal. When a debit card purchase is made, a POS hold, also known as an authorization hold or pre-authorization, is often placed on the funds. This hold temporarily freezes a specific amount in your account, ensuring funds are available to the merchant.
When a transaction is initiated, the merchant’s system sends a request to the bank to verify sufficient funds. If approved, the bank earmarks that amount, reducing your available balance. This temporary reservation is distinct from a settled transaction, which officially debits the funds from your account. The hold acts as a guarantee for the merchant, protecting them from potential losses due to insufficient funds or fraudulent activities.
Common Scenarios for POS Holds
POS holds are frequently encountered when the final transaction amount is not known at the time of the initial card swipe or tap.
Gas stations commonly place a pre-authorization hold, often for a predetermined amount higher than the actual fuel purchase. This initial hold ensures the card has sufficient funds to cover the eventual cost of gas. The full amount of the hold reduces the available balance, and the difference between the hold and the actual purchase is released after the transaction settles.
Restaurants also utilize authorization holds when a tip will be added after the initial charge. An initial hold is placed for the meal’s cost, and the final charge, including the tip, is processed later.
Hotels and car rental agencies routinely place holds for potential incidentals or damages. These holds can be for significant amounts, such as $300-$500 for car rentals, and are released once the service is complete and no additional charges are incurred.
Online and app-based purchases also involve immediate authorization holds, ensuring funds are available before an order is fulfilled or shipped.
Managing POS Holds
The duration for a POS hold varies, typically ranging from one to five business days for debit cards, though some can last longer. Factors influencing this timeframe include merchant policies, bank processing times, and the type of transaction. Some holds, particularly for hotels or car rentals, may last up to 30 days.
If a hold appears incorrect or takes too long to clear, first contact the merchant to inquire about the transaction’s settlement status. If the merchant confirms settlement but funds are still unavailable, contacting your bank is the next step. Banks generally have limited ability to release holds prematurely without merchant confirmation.
To minimize issues, maintain sufficient funds in your bank account, especially when engaging in transactions known to involve pre-authorizations. Understanding merchant pre-authorization policies, such as asking about the hold amount at gas stations or hotels, can be beneficial. Keeping receipts for all transactions helps monitor bank statements and provides documentation if a discrepancy arises. Regularly reviewing your bank statements and available balance helps track pending transactions and understand their impact.