Best Buy DeductsOf course that's a pun. Commence groaning.
Paul M., who has actually been inside the belly of the beast, sent me some information:
I worked at a Best Buy call center for about 8 months a year or so ago (one of the worst 8 month stretches of work in my life) in the online order support department, and I dealt with the authorization charges you are talking about quite a bit. We were given a reason in training for the authorization fee, so I thought I would pass it on to you.
The reason we were given was to prevent overdraft charges from appearing on customer accounts. When debit cards first started becoming common, people apparently had a tendency to pre-order an item and then not keep the money in their accounts to pay for it. So, when the item would ship, their cards would get charged the 15 or 20 dollars, their bank would cover the charge and then charge a 40 dollar service fee for doing it, at which point Best Buy has an irate customer demanding they be compensated for the charge. So, Best Buy keeps an authorization on the account until the order is shipped to make sure this doesn't happen. Of course, the reality is that the pending charge drops off and then gets reauthorized, so people can actually end up getting hit with fees several times, since the bank counts an authorization charge as a withdrawal in most cases.
Now I'll give you my personal opinion about why they utilize the authorization charges. Best Buy is moving more and more towards what are called Special Order Direct items. Basically, on items that are SOD, the items never enter a Best Buy warehouse. If you ordered sku number 9847049 for example (a maytag refrigerator) Best Buy would pass your order on to Maytag and the item would be delivered and installed by Maytag delivery people (or whatever delivery company they hired out to). They used to do this on appliances exclusively, but they are trying to move more and more towards using the SOD system with other products. Pretty much any CD on their website that says it is backordered and isn't brand new is an SOD item, where Best Buy passes the order to another company and they attempt to locate the CD and ship it out. The problem for Best Buy is, this company has no way of determining whether the card that was used to pay for the order has enough of a balance to pay for the item, or even if it is still a valid card. So, they keep an authorization on the card until the item ships to make sure they get their money, since UPS charges them to cancel shipping on an item. The authorization charge is pretty much there to keep from either delivering items that don't get paid for or having to pay UPS to cancel shipping on an item and send it back where it came from.
The website does say that your card will by charged for this authorization, believe me, I had to quote it 10 or 12 times a day. If you click on the Customer Service link, then the Payment and Pricing link under Help Topics, then select Payment Options and scroll down to the bottom of the screen, you see this:
When you place an order, Best Buy authorizes your credit card to make sure sufficient credit is available. A hold is placed on funds equal to your order total until the order is fulfilled.
Where this really gets fun is when someone orders an expensive item that isn't currently in stock, and it turns out this item will never be available for delivery. At that point, Best Buy will cancel your order, but that authorization charge can take as much as 30 days to fall off the card, depending on which credit card company you are using. We had the ability to get authorizations removed if the purchase was made on a Best Buy card, but anything else was "it comes off when it comes off". Good times.
If you're curious about how to tell what items are SOD, by the way, anything that says something like "From our expanded online assortment" is probably an SOD item. If an item doesn't say "normally leaves our warehouse in 1 business day" for shipping information, it is probably SOD. Likewise all those CDs and movies that say they are back ordered and usually ship within 1-2 weeks.
That seems entirely reasonable--to maximize their online profits, Best Buy wants to have as little physical stock as possible. Anything they can drop-ship makes much more money than something they have to stock. But it's highly unlikely that the inventory systems between companies have an effective knowledge of each other, because that would require a "bridge" be built between the two systems, and that can be difficult and expensive.
There's another possible explanation that could apply at times. Even for items that Best Buy stocks, there's no guarantee that the sales and inventory systems communicate to the degree that the inventory system can tell the sales system that a product won't be in stock for X more months, so the sales system just keeps authorizing funds holds.
It sounds like that would be easy, but I've worked in very big companies before, and the degree of interaction between the sales/accounting/inventory systems is often astonishingly poor. As an example, I worked in a big computer company that had a custom-built order entry system, a third-party inventory system, and a different third-party accounting system. Getting those different systems to communicate took a ton of custom interface work, and even then, the functionality was relatively poor.
As a consumer, though, I don't really care about Best Buy's problem, because it shouldn't be my problem. I just care that Best Buy is being tremendously stupid to their customers.