When purchasing using a debit card the almost universal process is for the bank to reserve the needed amount first and only later the actual money will be deducted from your account, later can be seconds but sometimes days.
This process is obviously needed to ensure that there is enough balance in your account, but why is it necessary in the first place? why can't the money be withdrawn immediately and transferred to the end business or the intermediate card company?
Because the merchant doesn't know the amount of the actual transaction in advance.
The classic example is the gas pump. When you pull in to a gas station, the merchant wants to verify you're able to pay before you start pumping-- it's obviously rather problematic if the customer pumps $100 in gas before realizing they've only got $20 in their account. But the merchant doesn't know how much gas you're going to pump until you've finished pumping. So they reserve a certain amount before you start pumping and process the actual transaction amount later after you finish pumping. That process may take time depending on exactly how the transaction gets processed-- merchants will often do this processing in overnight batches rather than doing it immediately after you finish pumping since they've already reserved the money they're going to be paid.
This sort of transaction contrasts with a more natural retail transaction where there is only a single step. If you go into a grocery store after you've filled up your tank and bring a dozen eggs up to the cashier, you and the merchant know exactly how much your transaction will be before you present your card so that's done as a single step with no pre-authorization required.
If you are seeing that every retail transaction looks like hold, that's most likely not a hold. It's likely that your bank is presenting pending transactions and holds the same way. If you present your card at the grocery store for a dozen eggs, the store authorizes the transaction with the bank immediately. There is then a second reconciliation step that happens some time later, often as an overnight batch operation, to finalize the transaction.
This depends a lot on both the type of charge and the systems involved.
First rule of using debit cards is that you have to have the money to use it. That's the main difference between credit cards (where you're given a credit line) and a debit card (where you're debiting your bank account directly). As such, banks have to go at great length to ensure you're not ending up overdrawing your account.
What it means is that any transaction using your debit card will be immediately communicated to your bank, and the amount the merchant communicated will be "set aside", or put on hold, so that the bank knows not to let you use it again in a different transaction.
You've got a great explanation from the user 'Justin Cave' about holds where the transaction amount is not known ahead of time. But it also happens when the transaction is known. In fact, from the banks' perspective it doesn't matter, the process is the same.
The transaction itself clears (or posts, different places use different terminology) at a different time. Sometimes the process is online, sometimes it is done in batches during the daily (or rather nightly) processing. Sometimes the transaction has to go through several different steps and be processed at different institutions. This is especially true for international transactions, but not always.
How you see it reflected on your account may not necessarily match how it is actually processed. For example, you may see a transaction, but it is actually a hold. How it is presented to you depends on the bank itself.
Once the transaction clears the bank reconciles it with the hold (matches the merchant, time, amount) and removes the hold. Sometimes this doesn't happen, and there could be many reasons, some examples:
It's a side-effect of how transactions are processed behind the scenes. Most debit transactions (along with other forms of relatively low-valued money transfer) go though an automated clearing house, or ACH. This is a system where a business or financial institution bundles up a large number of transactions and submits them in a single batch. This greatly reduces the overhead associated with processing the transactions and brings per-transaction costs low enough to be reasonable for low-value transactions. One big bulk transfer is more efficient than thousands of tiny ones. Instant funds transfers typically go through a central funds transfer system like Fedwire, which isn't designed to handle mass volumes of small transactions. ACHs also allow banks to use net settlement to minimize the amount of money that actually needs to be moved around. A secondary benefit is that it also shifts the time-consuming process of settling the transaction away from the point of sale, so that you don't have to hold up the line waiting for banks to coordinate and confirm fund transfers. Behind the scenes, some transfers can take days to complete.
One of the big problems with delayed-settlement payment systems is that overdrafts are easy to do. If you try to make a $100 purchase, the bank can confirm that you have $100 in the account to cover the transaction. However, if you promised that same $100 to multiple people in the same day (either by mistake or by fraud), only the first to settle will actually receive payment. A "reservation" or "hold" is the bank's remedy for this. Reserving the funds both confirms that they exist and sets them aside for this specific transaction, assuring the merchant that the transaction will settle as expected. It provides most of the security of an instant transaction, while retaining the ability to actually settle those transactions in bulk.
