Debit Cards

Debit Card Rewards, Limits, Holds

I recently asked a representative from Visa’s debit card division (site sponsor) several questions about my favorite alternative to the credit card – the debit card.  Here’s what the representative stated about debit card rewards programs, transaction limits, and debit card holds.

Are there rewards programs for using debit cards?

About 85 percent of U.S. households participate in at least one rewards program. Increasingly, consumers are looking for rewards and value for the transactions they make every day, like paying bills, buying groceries, or filling up their gas tank. As consumers turn to debit cards for these types of purchases – instead of cash and checks – more financial institutions are introducing debit rewards programs.

Often, issuers will pair up with a partner like an airline or hotel to give you the ability to earn points on a debit card toward rewards you care about. Some financial institutions also offer the ability to earn points for qualified purchases that can be redeemed through an online catalog, for items like gift cards, airline vouchers and hotel accommodations.

Many financial institutions also reward their debit cardholders for other relationships they have with the institution – like a car loan, savings account, mortgage, etc. – giving those customers the ability to earn additional points or other benefits.

It’s important to understand how you can earn points toward rewards – what purchases qualify, whether you earn points when you enter a PIN or sign for your purchases, etc. Make sure you ask these questions of your financial institution, as policies may vary.

If my debit card is associated with my savings account, are there limits to the number of transactions I can have in one month?

Most financial institutions will allow you to make transactions from your savings account, but this may be limited by federal regulations. You should check terms and conditions with your financial institution.

Why are there holds placed on a debit card?

Holds are often placed on a debit card as a precautionary method when you use your card in places like express/video checkout at hotels, at the pump or restaurants where the exact amount of a transaction may not be known when the merchant first requests an authorization for a purchase.

Some financial institutions that issue Visa cards decide whether to place a hold on your funds in order to protect themselves against the risk that you will spend more money than you have in your accounts. They place this hold in anticipation of the final transaction amount. The hold, which can be higher than the cost of the purchase, is what allows you to use your Visa cards even when the exact final amount of a transaction may not be known and when the merchant first requests an authorization for a purchase.

To clarify, Visa does not determine the hold – that’s up to the financial institution. But to help ensure that holds do not disrupt your access to funds in your account, Visa requires that card issuing financial institutions release all holds within three business days of the authorization request or when the transaction clears, whichever is earlier.

Ask your own financial institution about any available rewards programs. Personally, I use Wachovia Possibilities, which rewards me for signature-based debit card purchases.