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.