Editors Note: The following may sound crazy, but it's happening more and more every day, especially with rising gas prices. If you use your debit card to make a gas purchase, DO NOT pay at the pump! Pay INSIDE and use your PIN number. Otherwise...the higher price of gas has resulted in both account freezes and a windfall of overdraft charges for banks.
Consider the following scenario: You have $100.00 in your checking account. Early one morning on the way to work, you make a $25 dollar gas purchase with your debit card and pay at the pump. You have $75.00 left. However, unbeknownst to you, the gas station implements a $75 dollar hold on your checking account.
Now it's lunchtime and you buy lunch at McDonalds ($5.00). You have $70.00 left right? On the way home, you decide to buy a pack of smokes ($5.00), you have $65.00 left in your checking account, right? You pull in the driveway and the wife sends you out for Milk and Bread ($5.00) You have $60.00 left in your account right? WRONG!!!
Reality Check: The $75.00 hold triggers a $35.00 overdrawn checking (debit) account fee on the $5.00 McDonald's purchase. Same result with the pack of smokes. Ditto on the $5.00 Milk/Bread purchase. You now have $105.00 in overdraft fees. When the $75.00 hold is lifted early the next morning, the three $35.00 overdrawn fees (or $105.00) are applied to your account, but you only have $65.00 so you're left with a negative balance -$-45.00 instead of +$60.00.
End result? The $25.00 gas purchase cost you $130.00. Want to avoid this scenario? Pay the attendant inside with your debit card and enter your PIN number. PIN based transactions involve no hold because the amount is deducted immediately. This can save you BIG headaches.
Here's an article from The Charlotte Observer regarding this subject:
‘Freezes' by service stations above what's paid for gas can unpleasantly surprise people with low balances.
Some drivers paying for gas with a debit card are experiencing a different kind of pain at the pump. Gas stations concerned about collecting on automated debit-card transactions are freezing large amounts of money in consumers' checking accounts, causing financial headaches for some drivers who carry low balances.
In the past, when gas cost $2.00 per gallon, when a consumer swipes a card at a gas pump, most gas stations froze $1 as a confirmation that a valid checking account exists. That hold usually lasted for a few hours, but can stretch for a couple of days. The station later debits the actual amount of the gas purchased from the account. But as gas prices soar to record heights this week and fill-ups reach into triple digits, some stations in the Charlotte area and around the country are freezing much higher amounts, some local bankers say. Some of the consumer complaints have centered on Shell and Exxon stations, which are usually independently owned, though the practice could include other local stations. The consumer protection division of the N.C. Attorney General's Office has received more complaints this year about the practice, said spokeswoman Jennifer Canada.The office doesn't keep statistics on the specific complaint, but “as gas prices rise, gas stations tend to do this more,” she said. For instance, one consumer reported to the Observer that she purchased $25 of gas using her debit card at the Shell station on Gold Hill Road in Fort Mill, S.C. But she had $90 frozen in her checking account for several hours, along with the $25 for the purchase.
The manager of the station did not immediately return a message. And several other managers reached at various gas stations said they didn't know what amounts were being held or how it was determined. Despite the big-time names, most gas stations that sell Shell, Exxon and other brand names are independently owned.
Hotels have been placing extra holds on debit and credit cards for years in case customers run up extra expenses before checking out, such as for telephone calls, mini-bar items or other services.
But it has been happening at stations because some fear banks won't cover increasingly large gas purchases if the money ends up not being in a consumer's checking account, said Red Gillen, an analyst with Celent, a Boston-based financial services research firm. “Because there's a time lag between pumping and paying, there's a lot of money at risk. You're going to see more and more gas stations doing this,” he said. The hold policies can cause financial headaches for consumers in several ways, said Nathan Tothrow, director of marketing for Charlotte Metro Credit Union: A debit-card transaction might be rejected even though drivers have enough money in their accounts for the gas they want to purchase. “They have enough money for the gas, but not for the hold,” he said.The holds can tie up cash that can't be used for at least a few hours. Unsuspecting consumers can have other transactions incur an overdraft fee since there's a danger that the holds can stay on for longer than a few hours, which can result in other transactions causing an account to be overdrawn, triggering fees. Tothrow said the credit union has received complaints about excessive holds. The bank investigated and found several gas stations were freezing $75 and $90. “For a lot of folks, a $90 unexpected hold can cause a problem,” he said. “I really don't like that they are doing it to our members.”
The way to avoid holds is to use the debit card with a gas station attendant and enter your PIN number because there are no holds involved and the account is charged immediately for the exact amount, the N.C. Attorney General's Office says.
Most gas stations and merchants send in charges as one bundle at the end of the day, after most holds have fallen away, Tothrow said. But some stations have started sending in the charge for pumping gas quicker, even before the hold has worn off. That can put double financial pressure on a checking account, at least for a few hours.
