If you ever use your debit card to pay at the pump, watch out: Did you know that every time you top off the tank, a chunk of your checking account can be blocked -- sometimes for days, with the potential to cause you all sorts of financial headaches and bounced checks?
That's what happened to Jessica Hathaway, a state employee from Allentown, Pa. Earlier this year Hathaway stopped during her commute to fill up her car at Rauch's Mini Mart. She bought $22.29 worth of gas using her debit card.
The next day Hathaway balanced her checkbook using her bank's telephone service -- and something didn't add up. The bank said that she'd made two purchases the previous morning: one for the $22.29 and one for $75.
Trouble is, she'd only bought the gas.
Finally Hathaway called the service station, and an attendant explained to her what few people know.
How your money gets frozenIf you use your debit card at a pump that does not require a PIN, your bank regularly will block out an amount -- often $50 or $75 -- on your card.
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.
Each big oil company has a different policy: Shell says it preauthorizes just $1 for gas purchases, for example. Chevron says it has a $1 hold that ensures a card is active. British Petroleum preauthorizes $75 when customers use debit or credit cards, said spokeswoman Sarah Howell. The same policy applies at its Amoco and Arco stations, Howell said. Hess asks for $75 as well.
The reasoning behind this policy is that oil companies don't know how much gas you're about to pump -- only PIN-based debit transactions are processed immediately -- and so they earmark a certain amount of your money. "We want to make sure that we're protected, that we get payment for the gasoline," says BP's Howell.
This general idea isn't new. Credit-card companies have done it for a long time. (Think of when you rent a hotel room or a car, and the attendant runs your card upon your arrival to ensure you can pay for it.) It's less of an issue with credit-card owners, however, because you're usually told that it's happening and you're probably not flirting with your credit limits.
If a company puts a chunk of dough in your checking account off-limits without your knowledge, however, it can cause real migraines.
Consumer advocates say bewareBanks give conflicting accounts about what this means to you, the consumer.
Bank of America says that users of its debit cards won't experience bounced checks if debit-card blocks disappear on the same day as they're put in place. A spokeswoman for Wells Fargo agreed.
But the Wells Fargo spokeswoman, Linadria Porter, conceded things can get a little stickier if the block sticks for more than a day. "There is the possibility that you could bounce a check," she says. If a customer calls and points out what happened, "most of the time we will give them back those fees," says Porter -- but not always, she adds.
Consumer advocates say when in doubt, fear the worst.
"If there's a block on your account and you have checks come in against your block, you could suffer bounced-check fees," says Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group, who says his and other consumer groups have received complaints.
It's also unclear how off-limits your money is in other ways.
"Is the money technically unavailable? Yes," says Chet Bridger, a spokesman for Buffalo, N.Y.-based M&T Bank, Hathaway's bank. In other words, if Hathaway had gone to an ATM, she might not have been able to withdraw the cash, Bridger says.
The problem wouldn't be so nettlesome if the blocks disappeared within even a few hours. But the $75 hold that appeared on Hathaway's account on a Friday morning didn't disappear until the following Tuesday -- five days later.
"I was just fortunate that I realized it, because if I had gone grocery shopping that weekend I would have been in the negative on my account," she says. She thinks of the penalty fees she might have racked up. "And who would have paid then?" she muses. "Shell?"
"What really burned me up is not so much the financial aspect, but they didn't ask permission," she adds. "I wasn't informed."
Changing the policy?Hathaway has complained to the Pennsylvania Department of Banking and to the Pennsylvania Attorney General's Office, and to the mini-mart owner. To no avail, she says.
In fact, the policy doesn't show much sign of changing soon, despite some legal support for consumers. In 2002, California Attorney General Bill Lockyer issued an opinion that said that gas stations need to tell customers about the debit-hold policy.
"If the hold extends beyond the time of purchase and covers an amount greater than the amount of purchase, then the hold has to be disclosed to the consumer," says a spokesman, Tom Dresslar, summarizing the opinion.
Even so, Dresslar said his office was not actively pursuing any action against oil companies, and that he was not aware of any barrage of complaints by consumers.
How to protect yourselfHow can you protect yourself at the filling station? Station owners and consumer advocates offer this advice:
- If you must use a debit card, pay inside where you can use your PIN number; PIN-based transactions are registered immediately.
- If you pay at the pump, use a credit card.
- Oil companies' proprietary charge cards often don't have any kind of block feature on them, but not always. Chevron, for example, briefly blocks out $18.
- Good old cash is still good -- and many gas stations, tired of paying high credit-card fees, now give a discount of up to a dime a gallon for cash. Look for such deals.
Of course, as gas prices soar, more people find themselves not carrying the $50 or $60 in cash a fill-up now requires. The National Association of Convenience Stores estimates that 80% of gasoline transactions as of October 2005 involve plastic, up from just 54% in 2004.