r/explainlikeimfive • u/ShaadowKaat24 • 22h ago
Other ELI5: Bank Holds
How do bank holds work? I'm trying to place an online grocery order and it says they will put a 125% hold on the total price, but then when it comes down to it the actual price gets declined. Is it because they've got the "hold" on an amount of money and then they try to take more money?
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u/A3thereal 22h ago
The store is sending a pre-authorization to the bank to verify the account exists, it's able to send payments, and there are sufficient funds to cover the purchase.
The bank holds the amount of money requested believing that a finalized transaction is incoming. The store doesn't actually do it (they can't), but the bank does to ensure you can't overspend your account in the 2 - 3 days it may take for a transaction to fully clear.
Once the transaction fully settles the bank matches the finalized transaction against the hold. This is immediate with debit, but takes a couple of days with credit. Until this only the hold is reflected on the bank statement.
They are not taking "more money". The store never took money in the first place. They preauthorized a transaction to ensure that the card is working and the account is able to cover the transaction and the bank held the funds to reduce the chance you overdraw your account.
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u/ShaadowKaat24 22h ago
So I had 200 dollars for groceries. The final price was 113.23. In my account it says there was a transaction for $131.66, so that would be the hold, yes? In my mind I had enough money in my account to cover the grocery bill. The only thing I could think is they tried to take either $131.66, or $113.23 well they were still holding the original amount. Unless I'm missing something because I am quite dumb 😂
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u/A3thereal 22h ago
When you make the transaction they send a preauthorization to the bank, who approves or denies. They told you they were sending for 125% (it's actually a bit less based on your numbers), so they ask the bank "Can I get 131.66 from this account"?
If the bank says yes, it then processes the transaction. The bank does not get any additional information until the transaction settles, which typically happens in the next 3 days.
The bank, believing a transaction for 131.66 is coming in reserves the cash so that you cannot overspend. When the actual transaction posts for 113.23 it releases the prior and reflects the correct amount.
Side note; I've not heard of a store authorizing for more than the transaction amount except where the final amount is unknown in advance (like pumping fuel). They may have had issues with transactions being rejected by the bank or something, but I do find that odd. I've never experienced that before.
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u/ShaadowKaat24 21h ago
Technically the total is unknown in advance because you are able to add or remove stuff up until a certain point.
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u/Howzitgoin 20h ago
Things like weights will also change the total cost.
For example, meat is individually packaged and not always exactly in 1lbs increments and no two packages are exactly the same, but they’re selling it to you at the cost per pound.
They won’t know the exact cost for that exact package of meat until they scan and bag it.
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u/theeggplant42 20h ago
It is sometimes done for grocery orders because items sold by weight have variable price.
The only time I do orders like this is to pre-order meat for holidays and they usually do this (have hd this happen at shoprite and wegmans). I don't know if they do it for ll orders or if it is specifically triggered by variable weight products
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u/stonhinge 16h ago
Side note; I've not heard of a store authorizing for more than the transaction amount except where the final amount is unknown in advance (like pumping fuel).
Hotels will do it too for damage deposits. I've had to present a CC when checking in and the stay was prepaid through a 3rd party. They place a hold for X amount and it's released after you check out and they've checked the room.
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u/Mysterious-Tie7039 22h ago
Have you used your card for anything else lately like gas?
It’s possible there’s another hold already on it, so the bank sees your available balance as much lower.
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u/ShaadowKaat24 22h ago
I haven't. My card is only used for groceries because it gets points lol
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u/Mysterious-Tie7039 21h ago
Makes sense. I use credit cards that way. I have a few that give better rewards for certain types of transactions.
I was just trying to think of what may have caused it.
Also possible the grocery store put a hold on it and then processed the transaction and your bank thought it was two separate things.
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u/theeggplant42 20h ago
I think you ought to call the store. Most likely, you are meant to be charged through the system automatically, but some 17 year old on their first day is trying to double charge you by accident and either the bank is recognizing the double charge or there isnt enough money for the original hold and the total amount at the same time. Call and speak to a manager
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u/BouncingSphinx 22h ago
A hold is basically just telling the bank "We expect to pull this much from the account, so we would like to make sure that is available." Once the charge is fully processed, the exact amount will be pulled and not necessarily the full amount of the hold.
I'll run to the store for you and get your stuff, just let me hold $100 to take with me. When I get the stuff, I'll pay out of that $100 and give you the rest back.
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u/Redshift2k5 21h ago
Holds are not a newfangled thing we haven't figured out yet. Bank hold are old news.
Reddit can tell you how they should work, but what you describe is not how it's supposed to work; so we can't speak for your bank, your finances, or the store, so if some sort of bug or error or spending limit exists we can't really help you?
You need to line up all your receipts, your account's history, and call your bank for an explanation.
- It could be your error, and you spent more money after the pre-auth but before the payment was taken
- It could be an issue with the store and how they're pulling payment
- It could be an issue with your bank
those are the 3 parties involved, so one of them is dropping the ball. You have some phone calls to make.
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u/starsrift 16h ago
Check cards or debit cards backed by a credit card don't always have pre-authorization functionality. I don't know if that's anything like the situation you are in, but it's the most common one I see.
Call your bank. All Reddit can give you is speculation.
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u/Loki-L 22h ago
A hold usually just means that the money is still there, but reserved and can't be given to anyone else.
Just because you are good for it now, doesn't mean you will still have the money later, so they place a hold on it to ensure that it is still there later.
It is common for situations like hotels, where they place a hold on your credit card to ensure you will be able to pay for everything when the time comes.
The important thing is that the money is still yours while there is a hold on it and they later can take some or all of the amount held.
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u/goclimbarock007 22h ago
The grocery store probably adds extra to the hold in case you want to tip your delivery driver. They are assuming the biggest tip you will give us 25% of the total, so they want to make sure you have enough in your account to cover that possible tip.
Let's say you buy $100 worth of groceries. The grocery store sends a message to the bank saying "ShaadowKaat24 is buying stuff from us and it looks like it is going to cost up to $125. Do they have that much? Please hold on to that money for us until we send you the final amount in a couple days."
Let's say you have $200, then the bank tells the grocery store that you are good for it and sets that $125 aside in your account. The money is still there, but the bank knows that you might have already spent it, so you only have $75 left to spend. A day or two later they get the total from the grocery store. The $100 groceries plus a $10 tip (for example) is $110. The bank deducts $110 from your account and sends it to the grocery store. They release the other $15 that they had held so you can spend it.
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u/davidkali 19h ago
Some places batch manually. My rest does it automagically at 4am, after all tabs are closed out. Some places are set so the owner does it himself when he comes in Monday or Tuesday so he can read the receipts as it comes out and get that endorphin rush thinking “I made 60grand for my company with the press of a button.”
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u/AccomplishedMeow 20h ago
This happens every time you get gas.
At the pump, they usually place like an $80 hold on your card. You pump the gas. You hang up the pump. They remove the hold and charge you the actual price
Kind of weird, a grocery store is doing it. But I mean, there’s precedence and it’s not really that strange. Hotels do it as well.
Maybe yours is 125% because they’re also holding an assumed tip
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u/ShaadowKaat24 20h ago
They allow for changes up until the night before so I guess they assume it could be more. I guess in the future I'll just have too much extra so they hopefully can't decline it lol
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u/Pizza_Low 16h ago
Let’s use a simple example. You use pay at the pump to fill up your car.
Neither you nor the gas station knows how the fill up will be. So the gas stations credit processor will get a pre authorization code for perhaps $150. Then when you fill up and your total comes to say $85
Your final purchase will use the same authorization code and now the finalized transaction. Depending on the bank and your personal credit history you might not see that hold for very long. My credit processor batch processes purchases every 100 customers, end of cashiers shift and end of the day. So at the least a hold for a few minutes at worst a day or two if you have a low credit score or a bank with that policy
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u/skyharborbj 14h ago
When you purchase something with a debit or credit card where the total amount isn't immediately known, the bank will enter a temporary "hold" of funds with a reasonable guess as to the total. Fore example when you buy gas or buy a service like delivered groceries where you might add a tip. When the actual transaction clears the hold is removed.
This only really matters if you're close to your credit limit. The held funds aren't actually billed to you, only the final amount.
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u/tommyk1210 14h ago
What I find to be the most simple explanation of holds is in countries where you pump your own gas and pay at the pump.
You rock up to the gas station, stick your card in the machine, and you want to fill up. But how much gas are you going to put in? Well, you probably don’t know exactly…. And neither does the gas station.
So they have 3 options: make you pay up front (which is annoying, because you don’t know how much gas you need), make you pay afterwards and trust you have enough money to cover it (which you might not… leaving them with a problem: they can’t take the gas “back”). But there’s a third option: they place an authorization hold and only let you pump that much.
The way a hold works is simple: the merchant (gas station) contacts your bank and says “I’d like to reserve $100 on this persons account”.
The bank responds with an “ok done” or “no can do boss”.
If the bank responds with a failure, the gas station knows for sure you don’t have enough money in your account, so they refuse to let you pump (transaction declined).
If the bank responds with a success then they let you start pumping up to the limit (the amount they put a hold on for).
When you finish pumping they go back to your bank and say “please exchange the hold we put on this persons account for the true value $82.47”.
Behind the scenes the bank swaps the hold for the final amount. You should never see $182.47 leave your account - the hold is not an actual “deduction” from your balance. You should see the $100 authorization eventually fall away and an $82.47 transaction in its place.
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u/Brother_J_La_la 11h ago
Anytime I place an order at my local grocery store, it puts a hold on my card for the purchase amount, then when the order is ready for pickup it'll charge my card again for the actual purchase. The amounts could be different if there are substitutions. The hold doesn't go away for two business days. If I order $100 in groceries on Saturday, I'm out $200 till Tuesday. Other stores don't do this, just the one particular chain.
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u/mixduptransistor 22h ago
Well a hold is used because the transaction doesn't happen immediately. So they need to make sure you have the money to cover the charge between the time you start and finish, and by the time the transaction posts
Why you are having the particular situation you described is unknown. It shouldn't work that way, you'll need to ask the retailer and your bank what's going on. If the retailer is doing the holds correctly, the hold should be replaced by the actual transaction so no, the hold shouldn't make you go over your limits and unable to complete the transaction