3 men scam thousands on Disney Loophole

[WEDFan]

As I understand it, with a credit card you encumber the funds without making the actual charge, so it effectively lowers your limit to make sure that when the charge is made there is enough credit left. Then Disney accrues charges up to the encumbered amount, and makes the actual charge at the end (or when the charges reach the encumbered amount).

Since you can't do that with a debit card, it doesn't make sense to use a debit card to secure room charges. Basically, you, as the merchant, would need to have faith that when you made the charges there would be enough money in the account to cover it. You can't encumber against a limit because the limit is the balance of the account. You could, I suppose, check initially to make sure the balance would cover your charging limit, but if the funds were transferred out between the time of the check and the time of the charge you'd be left holding the bag.

Either way, what Zazu says makes sense. It's a big risk to secure with a debit card.

[kurtisnelson]

I've been trying to figure out how their scam worked, and best I can tell, it was the result of front desk cast not changing their credit limit when changing from a credit card to a debit card. The former has a Disney-set limit of $1500/$1000/$500 depending on resort category. Debit cards aren't considered a guarantee at all, and thus should only be used to make cash deposits.

Some debit cards can be ran as credit though and the merchant's system doesn't know the difference.

[Shorty82]

Some debit cards can be ran as credit though and the merchant's system doesn't know the difference.

Most can in my experience, at least in the US. We don't accept debit in the shops and I rarely run into a pure debit card (one that can't be run as credit). If there's a logo of one of the major credit card companies (MasterCard, Visa, etc.) the card can be used as a credit card.

[Big Wallaby]

Even on credit cards, you can put a hold on funds. I used to do this every night as part of my job as a hotel night auditor. If I met someone who was doing damage or I thought might steal when I wasn't looking (i.e., coming to the gift shop and just carrying things away), their hold would be higher. One guy talked about stuff he was doing in his room that had to damage stuff (smoking pot, and especially in a non-smoking room; painting, etc.) and I put a $3k hold on his card.

I believe the point of that hold is sort of like a lien on a house. "I was here first, I get my money before this other person who got their lien after me."

[WEDFan]

Even on credit cards, you can put a hold on funds. I used to do this every night as part of my job as a hotel night auditor. If I met someone who was doing damage or I thought might steal when I wasn't looking (i.e., coming to the gift shop and just carrying things away), their hold would be higher. One guy talked about stuff he was doing in his room that had to damage stuff (smoking pot, and especially in a non-smoking room; painting, etc.) and I put a $3k hold on his card.

I believe the point of that hold is sort of like a lien on a house. "I was here first, I get my money before this other person who got their lien after me."

Exactly. This is what I meant above by "encumbered". Even though a debit card can be used like a credit card for purchases, I didn't think you could put a hold on funds on debit cards. You might be able to check that there are sufficient funds at a point in time, but you can't expect that to hold true for any length of time since the funds could be used/transferred out after the check was complete. Ony a purchase affects the funds in the account behind a debit card to the best of my knowledge.

I just can't understand how this wouldn't be caught when running the card at check in. I can only think that they checked the balance and trusted that the funds would be there when the actual charge was made.

[Cheshire Figment]

I know that when I travel I tend to use Marriott as I am (only) a Gold Rewards Member this year and I use the Chase Marriott Premium Visa Card. Normally when I look at my Chase online I will see a "pending" charge equal to about double the estimated room and tax. A couple of days after I check out the actual charge will come in and the pending will vanish.

[Alyssa3467]

Exactly. This is what I meant above by "encumbered". Even though a debit card can be used like a credit card for purchases, I didn't think you could put a hold on funds on debit cards.

Depending on your financial institution, it may reduce your "available balance" by the amount of the hold, and possibly trigger automatic overdraft transfers and/or fees, even if the amount held ultimately doesn't post. I've had to spend time arguing with people with Wells Fargo Bank's customer service about reversing the fees and transfers associated with such a hold before.

[drcorey]

and if you are traveling on a debit card and on a limited budget,
you could be screwed when your trip funds are 1000.00 and come home to that much in over draft fees. or worse, half way thru your vacation your bank starts declining every amount. try spending the last part of your trip starving and in the street.

[reiella]

Depending on your financial institution, it may reduce your "available balance" by the amount of the hold, and possibly trigger automatic overdraft transfers and/or fees, even if the amount held ultimately doesn't post. I've had to spend time arguing with people with Wells Fargo Bank's customer service about reversing the fees and transfers associated with such a hold before.

I used to be a csr for a CC company. It's rather funny. I didn't work with debit, although I imagine that setup is very specific to how they set it up in the first place. I did work with secured credit cards though, which can be setup pretty similar to debit cards.

The funny thing is, most businesses don't know how their credit transactions work [they outsource it anyway].

Authorizations place a hold on your account for the amount they are authorizing. The authorization will stay on the account until the business posts the related transaction, rescinds the authorization, or it expires after a set amount of time [which varies based on the type of business the company is coded as]. An authorization is not supposed to be considered a charge [for terms of assessing interest or overage fees], however with debit cards, there's a good chance the debit card service will actually reduce the balance on your associated checking/saving account with just a hold at end of business.

So while there wasn't an over limit fee from the credit card side of things, the debit card can trigger an overdraft on your checking/savings. I really don't know the justification that the banks would use to charge your account balance for an authorization though. If I had to guess it's just to 'secure' the short-term credit for the debit transaction, but I dunno, it does suck for the consumer in those cases though. Especially as a lot of businesses don't really realize there could be a problem with posting an authorization multiple times. And then, there are restaurants which authorize an amount greater than your receipt total to cover the tip [they post what you write, but they authorize an amount over to cover the tip].

That turned out a bit more wall of text than I intended. So, here's a cute side note, gas stations authorize for a dollar when you do a credit swipe, then they force charge the actual balance.