Debit or Credit: Be Careful Which Plastic You Pick for Travel

Holds on debit card can freeze account, trigger overdrafts

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    A North Texas couple ended up with an overdrawn checking account while using their debit card after a cruise line placed holds on their account as they made purchases. Their account could not cover both the holds and their tab for onboard expenses. (Published Sunday, Jan. 13, 2013)

    Cruise lines and other travel-related businesses such as hotels and rental car companies often put holds on customers' credit and debit cards to ensure they get paid, but those holds can create account problems.

    It happened to Dan Burns and his wife Michele. The couple saved and budgeted so they could spend their anniversary in high-style on the high seas aboard a Carnival Cruise. For a week, the North Texas pair enjoyed breathtaking sunsets from their private balcony outside their cabin. They visited Jamaica, Cozumel and the Cayman Islands.

    "We had an absolutely fantastic time," Dan Burns said.

    They paid in full for the cruise ahead of time except for their activities, excursions, souvenirs and some food and beverages. For that, they relied on Carnival's Sail and Sign account. It's Carnival's company-issued card for onboard purchases that is linked to a customer's credit or debit card.

    Burns said he budgeted for these onboard expenses too and opted to pay his Sail and Sign account with his debit card instead of his credit card.

    "I was not going to spend over a certain amount. And I didn't want to use a credit card because I did not want to have to pay for all this later," he said.

    He said he had about $2,000 in his checking account. That should have been plenty to cover his more than $1,300 tab for onboard expenses. But soon after he returned home, he received a notification on his mobile phone that his account was overdrawn.

    "I had no access to any money at all out of my checking account," he said.

    Burns didn't realize the cruise company had placed holds on his account as he made purchases. The holds totaled more than $1,500. His account did not have enough to cover the holds and the original $1,300 bill. Essentially, the holds and the bill combined triggered an overdraft of his account.

    "I couldn't buy groceries. I couldn't get gasoline," Burns said.

    Gas stations, hotels, rental car companies and cruise ships are just a few types of businesses that place holds on credit and debit cards to make sure they get paid.

    Carnival does disclose this policy on its website.

    "If you presented a debit/check cashing card, the hold will restrict the available cash in your checking account," the website reads.

    But Burns, a retired police officer, said he thought he did his homework. He said he even asked several Carnival agents about the hold policy, including one agent on board.

    "She said, 'No, no, just whatever; at the end of the cruise, you'll get a bill,' which we did. And whatever is on your bill is what you owe them," he said. "I said, 'OK.' I felt, you know, everything was fine then."

    The NBC 5 Investigates Consumer Unit reached out to Carnival. In a statement, the company pointed to bank policy:

    When a guest reaches a certain threshold on their Sail & Sign card, Carnival’s system automatically sends an electronic request to the bank with the amount generated to date and requests a confirmation that the funds are available in the guest’s account. Once the bank confirms the funds are available they will hold the amount from the account, and as the guest continues to incur charges the process is repeated.

    At the end of the cruise, Carnival will submit one cumulative charge to the bank. Since the holds are in individual increments and the charge is a lump sum, the bank does not use the funds it is holding to pay Carnival. The bank will see this as a new charge and process the payment and keep the holds pending. This may or may not put the guest in overdraft, depending on their total bank balance.

    The bank will continue to hold the funds for a pre-determined time, based on the agreement signed by the customer and their bank at the time of opening an account. A vendor can ask the bank to release the funds. However, since the hold time is at the discretion of the bank they also have the right to decline a company’s request to release the funds on hold at which point the guest should contact their bank directly.

    Burns said he called Carnival, but a few of phone calls with the same agent eventually ran aground.

    "They were willing to book my cruise and take my payment and all that, but they were not willing to answer any questions or work with me on this," Burns said.

    He said his bank ultimately freed his funds, giving him access to his money until the holds were permanently lifted five days later.

    "I'd much rather travel to always be put on credit," said Todd Mark, vice president of education at the Consumer Credit Counseling Service of Dallas. "It's a lot easier to dispute when you've got the credit card issuer on your side as opposed to it's your bank account, it's been opened up, and it has been taken hostage."

    One cruise line even tells customers not to use debit cards for onboard purchases.

    Plus, consumers can still have a budget with a credit card if they pay the bill on time and in full, Mark said. However, if opting for a debit card, allowing for a cushion -- a large one, in the case of travel -- may be best practice.

    The Federal Trade Commission advises consumers to know their cards' hold policies. Ask the debit card issuer if holds are permitted, for how long and from what type of merchants. It's also a good idea to ask about overdraft policies.

    Consider paying a hotel, rental car, cruise or other bills -- which may have a hold -- with the same credit or debit card you used at the beginning of the transaction. If you pay with a different card or method, let the merchant or clerk know that the payment method has changed and ask them to remove the hold on the other card promptly.

    Also, if considering a new credit or debit card, shop around and ask issuers about their hold policies. Finally, realize a hold -- even on a credit card -- can affect your credit limit on that particular card. A hold can take two weeks or longer to be removed, depending on a bank's policy.

    Burns said he'll use a credit card the next time he goes on a cruise.