Warning: Banks putting undisclosed “holds” on ATM withdrawals

Automatic teller machine withdrawals are subject to all kinds of fees, to the point where Washington is getting involved. But new laws won’t protect you from ATM mischief when you’re overseas.

Longtime reader Steve Loucks, who works for the travel agency consortium Travel Leaders, just returned from London, where he found a shocker on his bill:

I used my ATM card twice, once through a Lloyds Bank and then through NatWest. Both times, I discovered today, each financial institution not only took out the amount I requested but they also placed a hold on my account for those same amounts (the latter hold doesn’t expire until tomorrow).

The red flag came today when I realized my bank had covered me for being overdrawn (fortunately, I have overdraft protection).

Have you ever heard about this happening before, and if so, why a bank would be allowed to double dip? For any unsuspecting traveler, it could wreak havoc on their banking accounts.

No, I haven’t heard of this happening. I’ve contacted both NatWest and Lloyds to get a comment. In the meantime, a search of their sites show no meaningful disclosure of the “hold” policy.

Hotel and car rental companies routinely place a “hold” against your stay, just in case you damage a car or destroy a room. But I can’t think of a good reason why a bank would do it for an ATM withdrawal.

  • Craig

    “But I can’t think of a good reason why a bank would do it for an ATM withdrawal.”

    It’s simple: $$$. Just another new way to screw people into overdraft fees.

    This sounds like a good one to get your MSNBC colleague, Red Tape Chronicles’ Bob Sullivan, on the case of as well.

  • Diana

    I agree with Craig. It’s all about money, but not necessarily about forcing people into overdraft fees. Think about it: the banks put a hold on your account for ATM transactions, even for a day, and will probably make interest on it while they have it. Even if your $20 makes a penny in interest, multiply that by the millions that are moved around a day, and they can make a nice chunk of change. Reminds me of the movie “Office Space.” They skimmed a fraction of a penny off every transaction and wound up with millions in a short time due to the massive amount of transactions taking place.

  • Andrew

    I haven’t been a “hold” victim, but I did have my bank freeze my card when I used it out of my “home” area, while on holiday. They claim it’s for fraud prevention. I told them I would accept all risk, and to permanently set my account so as not to have this happen again. I was informed it couldn’t be done, and I should notify them before I travel outside of my “home” area, even within the US, so they could temporarily suspend the freeze from kicking in.

    Yes, in order to use the debit card, I had to let them know when I would be out of my home area, and where (generally) I would be. Eventually, I hooked up with a manager who “fixed” the settings on my account so it wouldn’t happen anymore.

    Apologies if too far off topic.

  • Sean

    The hold is there in case you damaged the ATM machine during your use. They put the hold until they have a chance to review the video from the ATM and if it’s decided you damaged the ATM, then they keep the hold . . .

  • http://www.singleparenttravel.net John Frenaye

    Here’s a guess—what if Steve’s (by the way, hi Steve, how are you?) card was reported stolen. It could easily be flagged in the US, but it might take longer to get that word out to the foreign networks. Hence, the foreign bank distributes the funds and attempts to collateralize them with the hold. Once they get paid, they release it. Just a guess!

  • http://www.panchosays.com frank shiell

    Couple of ATM caviats:
    1) sime machines en Europe dispurse funds and your receipt, and eject your card simultaneously. Don’t dally grabbing your card, do that first…some ATMs are programmed fo that after a few seconds they suck your card back into the machine, and bye bye card — unless the bank’s open and you find a friendly employee with security key able open the ATM and fish for your card with improbable success.
    2) beware of last-minute screen fash, at the moment when you want to say YES return my card and give me a receipt… that “YES” could be asking you (not necessarily in English) for your to some worthy cause, a small amount but but disconcerting when when deducted.
    Otherwise, i find ATMs worldwide to be user-friendly and the most practical way of getting local cash. (Just take caresome countries with lots of zeros in their currency to hit the correct number thereof.)
    happy landings, Pancho Shiell

  • http://www.travelleaders.com Steve Loucks

    Chris,

    I want to clarify a couple points raised by your readers’ questions.

    First, I always notify my bank before I head out of the country, just as I do my credit card companies. They all knew I was going to be in the United Kingdom.

    Second, my financial institution made it clear to me that the holds on the additional funds was placed by Lloyds Bank and NatWest. There was no warning on the screen during either transaction.

    Third, neither ATM ejected my card until the transaction was complete and funds were dispensed.

    Finally, I’ve traveled to London more times than I can remember. This is the very first time this has ever occurred. Fortunately, I realized what had occurred early today, thus allowing me to transfer funds from my savings account to my reserve account without paying any additional fees or interest.

    But had I not returned from London yesterday, I likely would not have known and would have paid a substantial penalty for something that was not my doing.

    I still recommend to others to use their ATM card for some of the best exchange rates, but it’s important to beware of this potential trend/threat.

    Steve

  • Thomas

    I’ve traveled and used my atm card all over the world and never heard of this problem, nor some of the above. I just did a 4 week trip to Djibouti, Saudi, UAE, India, and the UK, and used my card in all of them. Maybe it’s the bank? B of A did freeze my account one time, even after I had advised them of my upcoming travels. After I threatened to close all my accounts, I’ve never had the problem again.

  • Carver

    I admit. I’m stumped.

  • Kd

    During my husband’s first tour in Iraq we discovered this. He used an American owned ATM (only choice at the time) in the PX in Iraq and our bank held anywhere from 2 to 3 1/2 times the original amount, causing us to overdraft on one occasion and causing arguments between him and I on others because I was unaware of the holds and just assumed he took out more money than he told me. Each time the amount was returned within 3 to 7 business days, but it was still very frustrating and like I said, did cause an overdraft.

  • Yang

    It is very likely that the money is held for the bank to clear any transaction charges associated with foreign ATM withdrawal. Such charges are common in credit card transactions (Visa charges the amount of the transaction + 1% and Mastercard charges +1.1%) and could be the case of ATM withdrawals. The banks usually justify this as the fees for foreign exchange, protection against sudden shift in exchange rates, and the fact that international inter-bank transactions might need to be verified again after the machine has authorise the transaction, which takes a few days to clear before the money can be unfreeze. Check with your bank first, because such fees are usually imposed by your bank on other banks to protect your bank from being overdrawn with the money that it does not have. Note that it is usually required for the ATM to prompt for your authorisation for charging you more than you had requested, since the ATM abroad did not you more money than you inputted would be charged, it is even more likely that the money is held up by your card-issuing bank.

  • Josh

    This is really concerning, and puzzling. There are (perhaps) good reasons for an initial hold greater than the final amount to be placed by a gas station, hotel, car rental company, etc, but I can’t imagine what the reason would be for an ATM — you enter how much you want, and then the request is submitted. At no time is there a danger you’ll end up with more money than that initial request.

    I would consider this practice fraudulent, and work with my bank to pursue the bank that placed the hold. I might even innocently let a small $20-$30 overdraft fee come into play to have something to claim back against the offending banks.

    The problem with ignoring it is that one day it won’t just be an overdraft issue — you will try to get some money when you really need it at another ATM and find that your funds are locked up.

  • Cindy

    Maybe because a US card usually doesn’t have a microchip in it? They could have placed the hold because a lack of microchip ID triggered extra fraud prevention tactics.