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Gas station purchases by debit or credit card may tie up extra money
Published on Sunday, Nov 04, 2007
Swiping your credit or debit card at the gas pump is a pretty mindless act. You stick your card in, pump about $40 worth of gas (or more these days, depending on the price of gasoline and the size of your tank) and go.
Then the $40 shows up on your credit- or debit-card account online, or on your monthly statement.
Right?
Sort of.
Often, a practice called credit and debit ''holds'' prevents you from drawing a certain additional sum from your account — sometimes as much as $100 — until the electronic systems at the gas station can be reconciled with the credit-card companies.
When you swipe your card, the retailer doesn't know how much the purchase will total, though an authorization has been given.
After you put the gas dispenser back in the cradle, the ''true up'' of the dollar amount you owe for the gas versus the amount of the hold placed by the merchant can sometimes happen nearly instantaneously — but it could take a day or two, or longer.
With more people looking at their account balances online, they may sometimes see the holds show up on the accounts, but not always.
It's a very confusing practice — one that's hard to get explained because every industry wants to point at another as the cause. The oil companies say it's the credit-card companies whose rules make them place the holds. The credit-card companies say it's the oil companies, or the banks that issue the credit cards, that require the holds.
The spin makes the industry doing the finger-pointing seem like an innocent bystander.
Regardless of who the instigator is — and the answer might actually be more than one party, because rules and practices seem to be all over the map — it's the consumer who is ultimately affected.
''The consumer is the one whose ox is getting gored,'' said Ed Mierzwinski, consumer program director for the national consumer-rights group U.S. PIRG.
Credit holds are nothing new. Holds are common for hotel stays, rental cars and restaurants, where the server might place a hold on your total bill, plus a customary tip, until
the accounts settle.
With pay-at-the-pump features on gas pumps, holds were used historically to check to see whether a credit card was valid because the merchant and credit-card company don't know how much you will spend at the time the card is authorized.
But gasoline holds have become more of a problem, experts say.
That's because the gasoline holds used to be around $35, and most people were using credit cards rather than debit cards. When an extra $35 is held on your credit card, most consumers who have really high credit limits don't notice it, Mierzwinski said.
But now gas is more expensive, people have vehicles with larger tanks, and more people use debit cards, which draw money directly from a checking account. And the credit holds have gone up to $50, $75 and sometimes $100 more than the cost of the gas pumped.
''There are blocks on credit cards, but most people are not at the edge of their credit-card rope,'' Mierzwinski said.
More people are close to a zero balance on their checking accounts, though, so the holds could result in an overdraft of their accounts and cause them to incur fees, he said.
Travis Plunkett, legislative director of the Consumer Federation of America, said these holds should be clearly disclosed at the pump. ''I may not swipe and run if I know it'll make a difference in the next 24 hours,'' Plunkett said, referring to paying at the pump.
Gas station owners say they face the consumers' ire.
''The retailer gains nothing out of the hold,'' said Jeff Lenard, spokesman for the National Association of Convenience Stores, whose members sell about 80 percent of the fuel in the nation. ''We take the blame and have customers that are not just angry, but unable to spend money in the stores.''
In a written statement, Visa Vice President Rosetta Jones said that because Visa doesn't issue cards, it doesn't place holds on funds. But some card-issuing institutions, to protect themselves against debit-card holders who spend more than they have in their accounts, place a hold on funds in anticipation of the final transaction amount.
''To ensure that holds do not disrupt card-holder access to the funds in their accounts, Visa requires that card-issuing financial institutions release all holds within three business days of the authorization request or when the transaction clears, whichever is earlier,'' she wrote.
But that time frame could still put people in a bind.
From the numerous phone calls I made last week, there doesn't seem to be agreement on whether going inside the station to sign for your purchase would remove a hold. One thing many of the advocates said was that PIN-based debit-card transactions at the pump — which require you to enter a special number — are run through instantly and usually don't result in holds on your account. If you use your debit card as a credit card, without the PIN, then you might face a hold because those transactions are sometimes not run by the merchant until the end of the day with the other credit-card transactions.
But many of you who use debit cards know that your banks often encourage you to run your debit card as a ''credit'' instead of using the PIN. That's because the banks make more money when a purchase is run through the credit system.
Although most people have problems with debit-card holds, there can be problems with credit-card holds, too.
A few weeks ago, Dora McCain of Akron pumped $42 worth of gas at a local Marathon station using her Discover card. The next day, while she was Christmas shopping, her credit card was declined.
She got the runaround when she called to find out the cause and was told there was an additional $120 hold on her account from the Marathon station. Discover blamed Marathon; Marathon blamed Discover.
Her issuing bank, HSBC, would not talk about her account with me, but McCain said an executive called to tell her that her card was declined and flagged for potential fraud because of a combination of a previous charge that had been accidentally double-charged and the large hold from the gas station.
''People need to be aware,'' McCain said. ''They need to know the charges that are being charged against them.''
So is there much a consumer can do to prevent the holds?
There's probably not much you can do to change the practice, but Mierzwinski of U.S. PIRG said you can use a few ''workarounds'' with debit cards.
''Don't use your debit card at gas stations. That's where this is most likely to occur,'' he said. ''If you disagree with that, then put $100 in your checking account that you ignore and learn to ignore,'' as a cushion.
''These are not perfect solutions, but if you want to avoid $35 overdraft fees, those are two things I recommend,'' he said.
Betty Lin-Fisher can be reached at
330-996-3724 or blinfisher@
thebeaconjournal.com.
Swiping your credit or debit card at the gas pump is a pretty mindless act. You stick your card in, pump about $40 worth of gas (or more these days, depending on the price of gasoline and the size of your tank) and go.
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