I got a question in the comments of another post on this site, about something annoying that happened to a reader when he filled up his gas tank:

Q. Can a Credit Card company pull more money than the purchase for a period of time?

Ex. I had 80.00 charged to my account for gasoline and when questioned the Amx guy said they always did that.

I can’t find anything to back this up other than my statement. If true could the companies be making money by holding my money for a period of time. Thanks for any comments.
Michael

Michael, the unfortunate truth is, yes, they can (and often do) do that. They usually only do this on debit cards, but if you have an American Express (Amex) charge card, I can see where they might treat that like a debit card. So what’s the story here - why do they do that, and why are they allowed to do that?

According to the MSN Money article “Hosed at the gas pump — by your debit card,” when you use a debit card at a pump that doesn’t require that you enter in your PIN, your bank can block off an extra amount of money in your account - “often $50 or $75.” Also,

That amount doesn’t “un-block” as you drive away. Instead, the hold remains up to 72 hours, until the station does a “batch” transaction that lets the bank know the actual amount, according to the U.S. Public Interest Research Group.

While the length of the hold is up to your bank, the amount of the hold is up to your gasoline retailer.

This annoying (and sometimes harmful) practice is designed to protect the oil companies. When you put your card in, they don’t know how much you’re going to pump, so they want to make sure you can pay for it before they approve you. So they “earmark” a portion of your money to make sure there’s enough in the account.

If you ask me, this is grossly unfair. If you stroll up to the pump with $80 in your account to pay for gas, and then they put a hold on your account for that $80 and then you pump $50 worth of gas - you overdraft!

And although most people might not skirt that close to the bottom of their account, I know plenty of people who do. After all, I’m in college - I hear things like “I’ve only got 30 bucks right now, and I’ve got to save that for gas” all the time.

What can you do to avoid this sticky situation?

Don’t pump with a debit card. This may not always be possible, but it’s a solution, none-the-less, and it’s the one I use. Actually, I try not to use my debit card for any purchases, for a variety of reasons. But this is definitely one of those reasons. And according to reader Michael, this also applies for Amex charge cards. Don’t use them at the pump, if you can help it.

I use my credit card at the pump - cash would obviously also avoid the problem. Cash usually isn’t as convenient, however.

If you do use your debit card, use your PIN. According to the MSN article, PIN-based transactions are processed immediately, without placing a hold on your account. So when it gives you the option to treat your card as a debit card (and enter your PIN) or as a credit card, pick “debit.”

Buy Sunoco gas. I actually noticed this a few months ago, while pumping at Sunoco - they have signs right on their pumps, that say they don’t believe in the practice of putting holds on debit cards, so they don’t do it. Kudos to Sunoco for that! So if you have the option of filling up at Sunoco, know that you can do it without facing a hold on your debit card.

Don’t drain your account down to the bottom. This might be a useless point to give to some of my college-and-minimum-wage readers, but I’ll say it for everyone else - if you can avoid bringing your bank account balance too low before you fill up, you won’t have to worry about whether you’re going to overdraft or not.

Also, keep in mind any checks that you’ve written that haven’t cleared yet, which may end up bouncing if the gas pump puts a hold on your account that lasts more than a day.

If you do get hit with a fee because of a gas station hold, call your bank. Dispute the fee, and do it right away. Politely, but firmly, explain the situation, and you have a good chance of getting the fee(s) reversed, especially if it doesn’t happen very often. This goes in line with the above tip - if holds are constantly making you overdraft, they’re going to stop reversing the fees after the second or so time it happens.

This is a slick, somewhat dirty - but mostly just annoying - practice, so I can see why reader Michael was peeved. I hope these tips help you, Michael - and anyone else who doesn’t like the idea of the gas companies latching onto an extra chunk of their money for a few days.

Here’s a tip:

Don’t trust your printer when it tries to tell you that you’re nearly out of ink. Especially if your printer is an HP psc 1210 All-In-One!

Mine told me back in September that I was nearly out of black ink, so I ran out and got a new print cartridge for it. Since I print a lot for both school and work, I knew I couldn’t afford to run out of ink. But I decided not to change the cartridge until I could see a noticeable drop in quality.

I’m still waiting, 6 months later, for that print quality to drop. And if you average out my printing, I probably print one page a day (yes, black - I rarely print color, I haven’t replaced the color cartridge in two years!). So that means that my printer can churn out over 180 pages on a “nearly empty” cartridge. (And counting!)

Moral of the story: the little warning icon might be a good indicator of when you should buy a new cartridge, but you can probably squeeze out quite a bit before you actually need to change the cartridge.

Also, here’s an indication of my insanity - once I do change the cartridge, I’m going to make a spreadsheet to track exactly how many pages I can get out of a cartridge. Yep - I’m nuts!

Although, maybe not that nuts - there are a lot of people that track things like this. I seem to remember a website where people could enter in how many miles they got on their tank after the gas gauge hit E… one of you reading this wouldn’t happen to know the name of that site, would you?

The following is a guest post by Tisha Kulak. Tisha is a writer for www.creditorweb.com, where she writes about student credit cards and responsible credit card use.

Credit cards and college students often go hand in hand. Emergency preparedness is a key factor in acquiring a credit card, especially in the case of a college freshman leaving home for the first time.

There is obviously a big learning curve starting out as a newbie to the college campus life. Getting orientated and situated can be a frustrating experience in the first few weeks. This is especially true when everyone else is also in a mad rush to get books and supplies they find the need once classes have begun. For students who can no longer rely on Mom and Dad to be right there with them, it is a wise choice to have a credit card in the event of such emergencies.

Credit cards, like college, are a huge responsibility. Both are also responsibilities that should not be taken lightly. Going off to college is an exciting time of perhaps new-found independence. Without a strict set of guidelines, credit cards can often be misused for non-related emergencies. Any person who is authorized to use a credit card should have full understanding that there are repercussions involved in making purchases. Students, who are now free to make most of their own decisions, need to fully understand that each of those decisions could potentially affect the rest of their lives. Credit cards are a perfect example of this.

Racking up thousands of dollars in credit card debt is not the way you want to start off your financial future. Purchases should be done only in emergency situations in order to keep your payments low and prevent additional fees and interest being tacked on. Impulse spending is the last thing you want to do with a credit card. Sure it seems to be free now, but there is no doubt you will be paying for it for a long time to come.

In addition to paying your bills in a timely manner, controlling your spending, and establishing a budget, it is also imperative that, as holder of the credit card, there is a responsibility to protect your information and keep your cards safe from other people. When first starting a new semester, odds are good that a whole new group of people will be hanging around. Keep credit cards in your possession at all times and never, ever give out credit card numbers to anyone.

It is also good practice even before leaving home that you catalogue the credit company’s name, address, contact phone number, and your account number and leave the list safe with your parents - in case your cards are stolen or misused illegally. You should also do this with all of your banking information and other important documents that could be potentially hazardous if it found its way into the wrong hands.

Credit cards are a big responsibility for anyone. College students already have a lot of new things to experience and learn. Being prepared and utilizing credit cards wisely will help jumpstart the building of a strong financial foundation as well as experience in making smart choices for the future.

* * * *

Stephanie says: I firmly believe in the ability of a college student to handle a credit card wisely, but we often see that just doesn’t happen. My advice to every college student who applies is this: remember exactly what that little piece of plastic is when you use it: a loan.

I’d be graduating this May - if I hadn’t taken time off last year - and so many of my friends are seniors, frantically working on their theses or job hunting or filling out applications for graduate school. And while the jokes are flying around (Marge Simpson: “Don’t make fun of grad students, they made a poor life choice!”), grad school is a serious choice that may not be so easy to make.

In fact, yesterday I received an email from a friend of mine:

Here’s a finance question for you.
Two fold.
One: Should I go to grad school? It requires getting about $100,000 in loans.
Two: If I go to said graduate school, what loans do you recommend?

It’s also about time I got to thinking about what I should do after graduation, so this is a pretty timely question.

Common sense tells us that more school = higher salaries. But we have to be leery of falling into the trap of thinking that more school is ALWAYS going to be better - after all, I’m still not entirely sure that going to film school was a great idea.

A report by the College Board titled “Education Pays: The Benefits of Higher Education for Individuals and Society” [PDF] lists the median salaries for different degree holders. A Bachelor’s degree can get around $49,900 a year, while a Master’s Degree bumps it up to $59,500. A professional degree has a whopping median of $95,700.

But it’s important to keep in mind that those numbers are medians, meaning that half of degree holders earn more than that, but the other half earn less. A higher degree is no guarantee of increased earnings, although it is a good indicator.

Kiplinger.com has a great article called The Back-to-School Decision, with some insights on how to go about deciding whether grad school is a smart bet. The first piece of advice: examine your motivation. The article offers up some examples of good, bad, and middle-ground motivations:

• Your firm won’t promote you to the position you want unless you have an advanced degree: right reason.
• You’re waiting for the job market to improve: wrong reason.
• You want to pursue a different field of study: maybe the right reason.
• You want to buy time because you aren’t sure what you want to do with your life or you don’t feel ready for the working world: wrong reason.

If you’re considering grad school for any of the wrong reasons, hold of and spend some time working first. The most important takeaway here? You can always go back to school later.

But come on, you guys aren’t asking me because you want hear any of that - you’re here to find out the answer to the money question. Is grad school a good idea financially?

Loans: Ya Gotta Pay Em Back

What it all comes down to, from the hard numbers side, is whether you’re going to be able to comfortably make the payments on your grad school loans. The first, most important, thing here is to look at your whole picture - that is, the total of your grad and undergrad loans. They may seem different to you now, but you’ve got to pay them all back, so use the whole number when you calculate.

A study conducted by student loan lender Nellie May (College on Credit: How Borrowers Perceive their Education Debt [PDF]) found that stress about student loan repayment was directly related to the percentage of monthly income that borrowers were required to pay toward their loans. That sentence was kinda a mouthful, so let me put it bluntly: The more you have to pay back per month, the more stressed out you will be.

Borrowers who have to pay less than 7% of their monthly income toward student loans generally do not feel stressed about their debt. Those who pay 7-11% of their monthly gross income feel a mild amount of stress. People who pay 12-16% report feeling overwhelmed by their debt, and those paying 17%+… well, you can pretty much guess that they’re going out of their minds.

There’s a great Loan Repayment Calculator over at FinAid that can tell you what income you’ll need to be making in order to keep your loan payments less than 10% of your monthly gross income.

If you run my friend’s estimate of $100,000 in loans through the calculator, you’ll find that she’ll need a yearly salary of at least $138,096 in order to keep her loan payments under 10% of her monthly gross. This means that every year she doesn’t make at least that much, she’ll be feeling the pain of her loans in a very big way.

And that’s assuming she doesn’t have any undergraduate debt, which is something I’m simply not sure of.

Not All Doom and Gloom

I hate feeling like I’m the bad guy, pointing out the big numbers involved in borrowing to go to grad school. So, I want to end on the high note here: finding free money to help pay for school, to help cut down on the amount of loans you need, is what will make up the difference.

The Kiplinger’s article suggests checking out the three “ships”: Assistanships, Fellowships, and Scholarships. If these aren’t enough to bring the amount you need to borrow down to an acceptable level, you may have to hold off for a little while. (Yes, this is that “you can always go back to school later” thing.)

However, if the “ships” do bring your necessary debt down enough, then you can start shopping for loans. Kiplinger’s also has a great article on Paying for Grad School that describes the federal loans available to you - always, always, always exhaust the federal loans before getting private loans!

If the numbers are too high, and it looks like grad school isn’t for you right now… don’t lose hope yet - during your job search, try and find work with an employer that offers tuition reimbursement benefits. Getting your employer to foot part of the bill can also make a huge difference, and the extra work experience might give you a leg up in the application process!

The Takeaway

More than anything, I would just like to see people stop and think and run the numbers before diving into grad school. Just like I dove headfirst into film school, thinking that I would just pay for it however was necessary and it would all be fine and dandy… that didn’t work out too well for me, and it seems like the stakes are even higher with a graduate degree.

Just run the numbers - please? Do it for me, but more importantly - do it for yourself. No one is going to pay back those loans but future-you. And believe me, there’s no one you want pissed off at you less than future-you!

Finally, a month to see some positive numbers, unspoiled by new student loans or car repairs! After three months of down, down, down, I was really glad to be able to calculate some gains and progress this morning. Here’s the result:

Change: $276 or +0.87 %

I made some slight differences in how I arranged the accounts within my NetworthIQ page. It didn’t affect the total (after all, ever dollar that I don’t have is still a dollar that I don’t have!), but I think it better reflects the debts I have, because of the changes I made this month.

Money that I’ve set aside in my ING savings account for paying off my credit card is counted against the credit card balance. Also, money on my second credit card, which is paid off in full each month, is counted against the cash account.

Therefore, the credit card balance is my first card, minus the total of my special savings account. Cash is the total of all my other cash accounts, minus my second credit card balance. This, I feel, better reflects my credit card balance and the amount of cash I have on hand.

Just today, my school withdrew the funds that will make up my last student loans for this school year, so there will be another significant drop in March’s net worth! I’m going to do what I can to cushion the blow, but there really isn’t much to be done about $3,000 in loans!

However, that will be the last drop of its kind until the end of the summer. It will be nice to see the graph climb upward for a few months in a row, again!

For a breakdown of my assets and liabilities, check out my NetworthIQ for February. Since I’ve changed the way I do things a bit, here’s an updated explanation of the different categories used in the calculation:

Cash: NetworthIQ lumps together all cash, checking, and savings accounts into one “cash” category. I have a checking account and a savings account with Bank of America. I also have several high yield savings accounts which are counted, except for my Credit Card Payoff savings account at ING Direct, which I count against my credit card balance.

I also count the balance of my second credit card (which I use to buy gas and incidentals and then pay off in full every month) against this Cash account, since that money is already spent.

Stocks: I have one share of Eastman Kodak stock, given to me by my grandmother. We Rochesterians are fiercely protective of Kodak, and I just keep hoping that they’ll hold on through this digital photography revolution. (Fuji is a four letter word to a Rochesterian!)

Cars: I have a 1996 Oldsmobile Delta 88. I don’t check the blue book value of it every month - it stays pretty steady, since I don’t put too many miles on it, and it had less than 50,000 miles on it when I got it!

Other assets: If there’s anything in this category, I explain it in the notes on NetWorthIQ - usually it’s checks that I’ve received, but haven’t cashed yet, or money someone owes me.

Student Loans: All of my loans are federal, I have no private student loans. They’re currently in deferment while I’m in school, but the unsubsidized Stafford loans are accruing interest, so those are my next target once my credit card is paid off.

Credit card: This number reflects the balance on my first credit card, which is mostly purchases from 2006 that I’m still paying off! Subtracted from the balance is the money in my Credit Card Payoff savings account.