"Nice character transfer system, blizzard." ⇒
12 October 2006, late afternoon
These sorts of stories are why I never let companies directly debit from my bank acount.
This is a post from my link log: If you click the title of this post you will be taken the web page I am discussing.
I checked my online credit card statement: no charges. I went back to the forums and it turns out that it doesn’t appear to happen to those doing the transfer with credit cards, but only guys with debit cards. Dozens of people complain that their entire accounts have been drained by this. They are completely broke; their banks have frozen their accounts.
I don’t think this is accurate. When you charge money to a credit card, it is actually a two steps – an authorization and a settle. The authorization checks if your card is valid and if the amount is less than your current limit. If it passes then the merchant has a time window (say 1 week) in which if they settle for that amount (or less) then they are guaranteed to get their money, which is only actually charged to the credit card during the settle.
Likely, what has happened is that the credit card has been authorized for $20, but not settled. Hence, the author sees no charges on his credit card. However, if he was close to his credit limit (or tried to buy something expensive) and expected the credit card to work, he would, in fact, end up in the same situation as the people who paid with debit cards.
If that we too abstract, suppose the author has a $500 limit and has spent $300 on his credit card this month. This his limit is really only $200. If there are five $20 auth attempts on his credit card, then his limit has now dropped to $100. If he goes to buy something worth $101 then it will be declined (“maxed out”), even though he thinks he should be able to put up to $200 on his credit card.
However, with a debit card (i.e. it behaves like a credit card, but is tied to your bank account), the process is the same, but the side effects of auths are more obvious. The bank “holds” money in your account during the authorization window. i.e. that money is still in your bank account (analogous to no “charge” occuring on the credit card), you just can’t access it (analogous to the “maxing” out example above). This is similar to the fact that you can only withdraw a certain amount of money from your account (via ATM) per day. So the money of the people who used debit cards is really in the person’s bank account, they just can’t access it (either because of either too much activity on their account that day, or the money being held). Once the hold period (or the day) ends, then the person can access the money in their bank account. (If they talk with their bank/credit card processor the hold should be released too, but likely only after spending a ridiculous amount of time on the phone).
Now, if they had being trying to directly debit the bank account (through ACH/EFT) then this problem would not have occured (since there is only a settle, no auth)! (Doesn’t that just blow your mind Ram? :-).
(Of course, there are other use cases were the reverse is true – directly using a bank account is more problematic than using a credit/debit card).
by Ryan on October 13 2006, 6:57 am #