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I recently made a transaction online using my UK current account Debit Card (maestro). Essentially I deposited money into my online account, which can the be used to play games.

The website informed me that the deposit was successful, and over the next couple of days I spent the online credits.

About 5 days after the online transaction I went overdrawn. Apparently the money was not taken from my card (even though the website said it had been), therefore I spent my remaining balance before they withdrew it.

I understand it's partly poor management on my part, but is this really legal? It seems very unethical at least, that you can deposit money into an online account and the company does not have to actually take the money from your account straight away, they can give you the "service" and take the money out whenever they like down the line.

Has anyone been through this before? Are there any resources online which explain this? (I couldn't find anything via Google)

Thanks.

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Debit Cards have a certain processing delay, "lag time", before the transaction from the vendor completes with your bank.

In the US it's typically 3 business days but I have seen even a 15 day lag from Panera Bread. I guess in the UK, payment processors have similar processing delays.

A business is not obliged to run its payment processing in realtime, as that's very expensive.

Whatever be the lag time, your bank is supposed to cover the payment you promised through your card. Now if you don't have agreements in place (for example, overdraft) with your bank, they will likely have to turn down payments that exceed your available balance.

Here is the raw deal: In the end, the responsibility to ensure that your available balance is enough is upon you (and whether you have agreements in place to handle such situations)

So what happened is very much legal, a business is not obliged to run its payment processing in realtime and no ethics are at stake.

To ensure such things do not happen to me, I used to use a sub-account from which my debit card used to get paid. I have since moved to credit cards as the hassle of not overdrawing was too much (and overdraft fees from banks in the US are disastrous, especially for people who actually need such a facility)

  • I doubt you're right. If they reflect the transaction as posted, why would they "unpost" it? Was it rejected by the bank? Was the card invalid? Doesn't make sense. – littleadv Apr 1 '12 at 19:38
  • This situation seems very specific to "instant gratification" sites that take payments online. As long as the card is valid, and the transaction is approved, the site allows you to access content. You could very well have $0 in your bank account and your card provider does not know it yet. Once the transaction forwards to your bank and they reject it, the whole transaction rollbacks. You can try this: buy a 0 balance prepaid card and signup for GameFly/Hulu and other "instant gratification" sites. A lot of students I know abuse this. – f1StudentInUS Apr 1 '12 at 19:42
  • I'm not sure you know what a "maestro" card is. Its a debit card, like what we have in the US. You cannot get approval if the funds are not available, and you cannot use the funds if the bank approved them for something else. Basically, if the vendor was approved - there has to be something really out of the ordinary to happen for the vendor not to receive the money (as opposed to a regular credit card, for example). I haven't met a rejection on an approved debit card purchase in my experience in this industry, and I have some. Zero balance prepaid cards work slightly different – littleadv Apr 1 '12 at 20:07
  • Hmm, my personal experience with debit cards in the US has been that they do not deduct the funds right away and the transaction goes into a "Processing" state for a few days. During that state, funds are not deducted. This is in contrast to what used to happen in India where money used to be debited bight away from my account within a few minutes of swiping the card at the POS. Both cards were from VISA through my bank. – f1StudentInUS Apr 1 '12 at 20:24
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    Yes, at least the way I know it. Its like an ATM transaction in the US. – littleadv Apr 1 '12 at 22:37
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When processing credit/debit cards there is a choice made by the company on how they want to go about doing it. The options are Authorization/Capture and Sale.

For online transactions that require the delivery of goods, companies are supposed to start by initially Authorizing the transaction. This signals your bank to mark the funds but it does not actually transfer them. Once the company is actually shipping the goods, they will send a Capture command that tells the bank to go ahead and transfer the funds. There can be a time delay between the two actions. 3 days is fairly common, but longer can certainly be seen. It normally takes a week for a gas station local to me to clear their transactions.

The second one, a Sale is normally used for online transactions in which a service is immediately delivered or a Point of Sale transaction (buying something in person at a store). This action wraps up both an Authorization and Capture into a single step.

Now, not all systems have the same requirements. It is actually fairly common for people who play online games to "accidentally" authorize funds to be transferred from their bank. Processing those refunds can be fairly expensive. However, if the company simply performs an Authorization and never issues a capture then it's as if the transaction never occurred and the costs involved to the company are much smaller (close to zero)

I'd suspect they have a high degree of parents claiming their kids were never authorized to perform transactions or that fraud was involved. If this is the case then it would be in the company's interest to authorize the transaction, apply the credits to your account then wait a few days before actually capturing the funds from the bank.

Depending upon the amount of time for the wait your bank might have silently rolled back the authorization. When it came time for the company to capture, then they'd just reissue it as a sale.

I hope that makes sense. The point is, this is actually fairly common. Not just for games but for a whole host of areas in which fraud might exist (like getting gas).

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