I have a sum of money on a prepaid Mastercard debit card which I attempted to use the majority of to make a purchase from a vendor who uses Paypal for their payments. Unfortunately, the vendor ran out of stock of one of the items between me placing it in my cart and the checkout process completing, so they cancelled the transaction after Paypal had authorized payment, result in a pre-authorization hold being placed on the money on my card account. Having discussed this with both the card issuer and Paypal, it seems neither is actually able to do anything about this hold, which is due to last a week, however I have urgent need of the components I was trying to buy. Can anyone tell me if attempting to make a Paypal purchase with a different vendor will use the pre-authorized funds (as it is being acquired by the same merchant) or not (because it is not the same transaction)?
3 Answers
Imagine the following scenario:
You have a credit limit of $1000 and you want to by a tablet from a store. It costs $600. You then walk next door and buy a TV for $600. You would expect that you would go over your limit and the second transaction will be rejected.
As long as that hold is in place, you don't have access to those blocked funds. That makes sure that you can't promise to pay more than you have funds on the card. Holds can get in the way if you are close to your credit limit. People run into this problem if they reserve a hotel room, rent a car, or purchase gasoline. The hold is set at a specific level to make sure you have enough funds for the typical transaction.
This distance between vendors is not relevant. The bank is blocking funds based on a request from a vendor. They have to block the funds because you might use the multiple times in the same store. It is possible that the card company might release the hold based on the request by the vendor, but they generally don't.
If this is a debit card linked to a bank account, the bank can have access to the overdraft system or a linked savings account. If is is a credit card they can decide to to increase your credit limit, and offer you what is essentially a loan. Plus they can hit you with fees. But if the card is a prepaid debit card or gift card they don't want to allow you to go beyond your limit.
If this is a card that you plan on recharging, you could put extra funds on the card to allow both the old hold and the new hold to co-exist.
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Yes, but my query isn't equivalent to walking next door. I'm talking about buying something else from the same store... why would this not be possible? The hold exists so that the store can be certain they can get a particular amount of money from me, so my question really boils down to: is it important whether the money they're taking is for the same purpose they originally obtained the hold? Does the hold reserve it for them or for the original transaction? Commented Mar 23, 2014 at 5:10
You said the hold would last a week. That's your answer. No you can't spend it again until the hold clears.
In short you have to wait till the hold expires. If its one week, its great. Few years back it was one Month.
It is advisable you use a Credit Card for these type of transactions. With Credit Cards you are not out of funds like in Debit Cards. Plus the reversals are as much as I know automatic. In case of Debit Cards, the Holds are not automatically released on cancelled transactions but released only after expiry. Where as in Credit Cards, the holds are released immediately on cancelled transactions.
"Does the hold reserve it for them or for the original transaction?"
Yes hold is for that specific transaction from that specific merchant. i.e. if you try and book the same item from the same merchant, you will not be able to as you have money blocked. Although the merchant sends an unblock message when cancelling, on Debit cards these messages are not supported in India
