Lately, I've been paying close attention to the day-to-day activities on my debit card. I use a two-account system where all of the money that's used to pay bills and rent and stuff like that is in one account and whatever is left over goes in to another. The latter account is the one I use for stuff like food, gas, toys, and whatever else is not a recurring or billed expense. This system has worked well for me for years. It keeps me from bouncing checks or not having enough money to pay bills on time, and it also has some forced saving built in to it. The mad money account is great because at any time I can check my balance and know that that's how much money I need to live on until I get paid again. The sort of object of the game is to have that account end up at about $0 the day I get paid, so I check it several times a day when I get close to the end of a pay period.
Lately, I've noticed that there are times where there is not nearly as much in that account as there should be. I'll check later, and the available balance will have increased. The reason for this is HOLDS.
For those of you not familiar with the credit card processing industry (I did tech support for credit card software for a few years early in my career, and I remember a thing or two), the transactions work like this:
- You decide to purchase an item for, say, $50.
- The merchant authorizes $50 on your card. This creates a "hold" for $50, but the balance has not been deducted and transferred to the merchant.
- Some time after that, usually that night, the merchant "settles" with their processor. At that time, the funds are deducted from your account and credited to the merchant.
If, for some reason, the merchant doesn't settle up with the bank for a few days, the hold will often "drop" and the funds will again be available in your account. The merchant can also in some cases change the amount to something lower than what was held, and when they settle that will get rectified properly.
It is common, in some cases, for a merchant to authorize a higher amount than the purchase price. For example, your bill at a restaurant might be $100, but they will authorize for $120, to account for a tip. If you then sign for $110 (you cheap bastard), then that is the amount that will be charged, and the extra $10 will just be magically available again.
There are rules around how and when merchants can do something like this, but they vary from processor to processor (when I worked in this industry, there were well over 100 processors), and also from merchant type to merchant type (a restaurant may be able to do this while a retail establishment probably can not). It's not very transparent, but the important thing to remember as a consumer is this: You have no knowledge of, and no control over, what a merchant can do with your credit card once you hand it to them. Certainly you can resolve any conflicts or shady behavior with many long Muzak-laden calls to your bank, credit card company, the merchant themselves, etc.., but that's all retro-active and usually by the time you're aware that there's a problem you need to address, you've bounced some other transactions or your budget has been shot.
This is what's been happening to me lately. As I mentioned above, I keep close tabs on what's in my account and how many days left until it is replenished. One day I may look at it and see there's $500 and five days until pay day, and that tells me I can spend $100 per day on average until I get paid. If I then go out to eat with my wife and spend $100, then mentally, I know I'm cashed for the day or I have to dip in to tomorrow's budget. Whatever the case, I know that I've got $400 left until pay day.
This would be all well and good, except for holds; specifically holds for much more than the amount I agreed to, and this has been the root of my problems lately.
It started the week of Thanksgiving, which was a particularly long pay period for me. I get paid on the 15th and last day of each month. If the pay day falls on a weekend or holiday, it gets done the last business day before. That means that sometimes I get paid on the 13th, and then not again until the 31st of a month. That's what happened in November (the 30th, actually), so the card was a little tight toward the end.
We'd gone out to dinner at an awesome Japanese Kobe steakhouse/hibachi place in Waikiki. The bill before tip was around $110. Afterward, we stopped for ice cream at a Haagen-Dazs, and all was right with the world.
A few days later, we were getting ready to go out to dinner again, and because it was near the end of the pay period, I checked my balance and found that it was way, waaaaaaay lower than I expected. It was low enough that I became really concerned that my card number had been stolen or otherwise abused. I called my bank, E*Trade (who, by the way, have the best customer service that I have ever gotten from an India-based service center), and asked them to tell me what was held on the account. To my surprise, both the steakhouse and Haagen-Dazs had each put holds on my card for DOUBLE the amount of the pre-tip bill. Actually, each place had put two individual holds - that is, the steakhouse put two holds of $110 each, and Haagen-Dazs had put two holds of like $12 each. I thought this was a little weird to be human error, but what pissed me off more was that here I was still a couple of days from getting paid and instead of having $150 in my account, I had $26.
I'd done everything right as far as managing my account and budgeting, but I still got screwed. Sure, the money would eventually settle up, but what about in the meantime? What if I had to put some gas in my car? What if I was a single mom and I had to feed my kids? What if I was counting on that money being there on that day so I could purchase medicine or something? How in the fuck can someone hold MY MONEY that I haven't authorized them to hold, without any sort of compensation?
I originally chalked it up to the Holidays and maybe inexperienced clerks/wait staff or whatever, but I noticed today that it's happened again. We went to Bucca di Beppo on Christmas before going to the movies. The pre-tax bill was $80 and I wrote it up with tip for $100. Yesterday, the balance in the account was around $150 (lower than I was expecting) and the Beppo transaction was not showing up yet. Today, it's $230 and Beppo does show up there, with the correct amount charged. Like the others, they'd double-authorized and my money was tied up there until they settled.
This is fucking bullshit.
First of all, I have to question what's changed in credit card processing that made this practice start becoming more common. I've never noticed double holds before. Sure, I'm used to a restaurant or a gas pump authorizing a little bit more than the check until everything is settled, but double is fucking nuts. It makes me wonder if the credit card companies have started cracking down on the practice of authorizing more than the check and this is the way the restaurants can be sure that there will be enough in your account to cover the tip?
Another possibility I wonder about is if this is a Hawaii/bad economy thing. A waitress at one of our favorite Waikiki places recently told me about how they often get stiffed by foreign tourists who are bad at figuring out exchange rates or how our currency works. They'll leave what they think is the right amount on the table, but in reality it's not even enough to cover the check. I suppose similar mistakes could occur when a card comes in to play. I know that in a lot of cases, whenever something goes wrong with a credit card transaction in a restaurant (forgot to sign, wrong copy left, etc...), then the credit card company will absolutely not pay more than the amount of the actual check, so the tip is gone. Perhaps it is the servers that are doing the double-authorization, to make sure their tips are safe?
Something else I wonder about, if this is tip-related, is why Haagen-Dasz, a stand at the counter and order ice cream place, would do this. As I recall, they don't even provide a space on their credit card receipt to write in a tip.
Whatever the reason for this, it blows. I hate having to check my balance every single time we get the idea to go out to eat or do something fun. I also hate being really careful about my spending only to have to eat Ramen for two days at the end of my pay period just because some restaurant needs to hang on to my money for a while.
The answer, I guess, is cash. Fortunately, my bank allows me to withdraw cash from any ATM without ever paying ATM fees (on my type of account, E*Trade actually refunds any ATM fees that I incur, usually within hours). Most places have an ATM in or near them, so that's not a problem. It sucks for the economy, though, because I don't usually take the cash in my wallet in to consideration when figuring out if I have enough money to go out. I also tend to be a lot more generous when I tip on my credit card because I like nice round numbers and it's easy to do the math when I have a pen and piece of paper with half of it already done. With cash, I'm less predictable. The amount I tip (if I go out at all), can be affected by how much I have left in my wallet, or what denominations of bills I get as change from the bill (a good server knows to give you enough ones small bills to leave 20%, instead of just giving you the fewest bills possible).
I want to be a good consumer. I want to put money in to the local economy by going out to eat and enjoying this beautiful place where I live. I want to support people who work hard in these places by giving them generous tips. But, when doing these things inconveniences me as it has, I question whether it's at all worth it. It's so much easier and safer to just buy some groceries from a retail store that will allow me to do so without an excessive ransom.
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