A gift card is like a debit card: Transactions with pre-authorization can lock up your funds for longer than you might think.
If you receive a debit gift card for the holidays, congratulations. Santa’s been watching and you’ve been good. But if you take that debit gift card and use a small part of your allotment to fill up the gas tank, or to enjoy a restaurant meal, or to run a tab at the pub, you might run into a pre-authorization surprise. There is a good chance that some or all of the remaining funds on your debit gift card will be put on hold until this transaction clears, which usually takes several days.
According to Deloitte’s annual holiday survey, debit gift cards will be the top holiday purchase for the fifth year in a row. Two out of three shoppers will buy debit gift cards. Shoppers are concerned about companies going belly up amid the economic crisis, so they are buying more general debit gift cards from banks and credit card companies.
Closed Loop Gift Cards
Store-branded gift cards that can only be used at that retailer or its properties.Open Loop Gift Cards
Gift cards similar to credit cards: Issued by banks or credit card companies, usually bearing the Visa, MasterCard, American Express logo or bank name.Gift Card Gotchas, AARP
Gas stations, restaurants and bars, along with hotels and car rental agencies, are among the places where debit card transactions, and therefore gift card transactions, are pre-authorized. These are signature or “non-PIN” transactions. Managers of the gas stations and restaurants and bars will explain that the purpose of the hold is to make sure they get paid; in other words, to make sure you don’t go someplace else immediately afterward and make another transaction that drains your debit gift card.
These holds usually are for two or three days, but people have reported an inability to access the remainder of their cash for a full week, sometimes even longer. When people don’t understand how the debit gift card process works, they fear that the money has been taken from them for good, or that someone is committing fraud against them.
Experts say that at most gas stations, if you take your card inside rather than swiping it at the pump, you can use a personal Identification number (PIN) to avoid the pre-authorization hassle. The same goes for restaurants and bars. So, it pays to be a PIN-head to prevent your debit gift card cash from being placed on hold.
