Using Credit, Debit Card to Buy Gas Now a Major Financial Decision

Does your credit or debit card feel a bit lighter these days after you do the in-and-out swipe thing at the gas pump? You may not know the half of it.

Sure, gasoline prices are on a head-shaking, breathtaking ascent, a steep trajectory that is inflicting all sorts of economic pain. You put $20 worth of gas on your card and, if you listen closely, you can almost hear your still-hungry fuel tank rumbling, "What is this -- an appetizer? You're kidding me, right?"

But that's not all that's going on, card-wise. Behind the scenes, as you stare at that "authorizing" message on the pump, computers are whizzing and buzzing and talking to each other about you and your credit or debit card. Those conversations could be complicating your financial life.

"I don't think the average consumer has any idea what goes on behind the scenes when they swipe a card ... ," said Jeff Lenard, vice president of communications for the National Association of Convenience Stores, which represents most gasoline retailers. "The credit and debit card system is incredibly complex."

*Complication No. 1: The station could be imposing a credit or debit transaction limit that is too low. At a time of sky-high gas prices, these limits could prevent you from filling up your tank -- at least on the first try.

*Complication No. 2: The computers could be imposing a "block" or a "hold" -- reserving a larger portion of your available credit card or debit card balance than you really need to complete the gasoline purchase. If you're already running close to the edge on those accounts, this could trip-wire additional fees or embarrassing and inconvenient bounced transactions.

"That's the one that really causes consumers a lot of angst," Lenard said.

With everyone concerned about gas prices, Lenard is a busy man these days. The association represents 146,341 U.S. convenience stores, which in turn, sell about 80% of the gasoline purchased in the United States each year.

Many consumers blame those stations for the higher prices, which is not really fair, he said. "You still hear and see a lot of comments about 'price gouging' by the stores," said Lenard, who tries to set those people straight. "Our members are probably losing money now when customers use plastic to buy gas, but I guess it's job security when my phone is ringing off the hook."

Gas prices spikingConsumers surely have reason to be angry at ... somebody. The national average for regular gasoline reached $3.52 per gallon Wednesday, according to the AAA's Daily Fuel Gauge Report. That's an increase of 40 cents per gallon over a month ago and 77 cents per gallon over a year ago.

Gasoline already is at its highest level in more than two years and experts say it's likely to go higher as tumult endures or even intensifies in the Middle East, as oil speculators continue to speculate and as summer approaches, bringing with it more demand and more expensive refinery techniques.

"When I pull up to the pumps these days, I open my wallet and I look at all of my credit and debit cards," said Chelsea Garfield, who owns a small business in Tallahassee, Fla. "I used to whip out my debit card without much thought, but with the sudden and drastic increase in gas prices, it has now become a decision I have to make. I'm about to add $50 to one of these cards."

Filling up and your financesSo, once again, gasoline is a major purchase, carrying with it big questions and consequences: Debit card or credit card? Which credit card has the most available balance? Which card has the lowest interest rate?

Another issue: Should you use or apply for one of the new hybrid gas cards -- a breed of cards that are issued by banks but co-branded with an oil company and carrying a conventional Visa or MasterCard logo? These can offer deeper discounts on gas purchases, though usually only for fuel sold by that particular oil company.

Setting that one aside for now, here is what Garfield and all of us need to know about gas pump transactions:

Limits: Visa and MasterCard require retailers to place a "preauthorization" of $1 on credit card and many debit card gas purchases. This is simply to ensure that the card is live and, given that it's only $1, generally doesn't pose any problems for consumers.

But here comes another hurdle. When the transaction is authorized, many gas stations impose a limit on the size of the purchase that is under way. This could happen under any circumstance, but it is a nearly automatic and universal response when the customer swipes the card at the pump.

Matthew Towson, a spokesman for Discover, said this process is intended to at least partially protect the station from losses. "Since for pay at the pump there is no signature required, there could be an increased risk of fraud," Towson said.

Typically, these limits are around $50, though they can be higher or lower, depending on a variety of factors. This is not much of an issue during normal times, but it can be a big issue when gasoline prices reach the heights we are seeing now.

In California, for instance, gas prices are approaching and even exceeding $4 a gallon. At those prices, if you bring in a car or, especially, a pickup truck or a large SUV that's low on gas and the station is imposing a $50 or even $75 limit, you may not be able to fill it up.

"Two things happen and they're both bad," Lenard said. "The customer comes into the store and goes from being just annoyed about the price to being outraged. 'I'm trying to fill up. Why did you do this to me?'"

The solution: Go back to the pump and initiate a second transaction. This, of course, is an inconvenience for the convenience store customer.

But for the retailer, it brings about that second bad thing mentioned by Lenard -- an additional cost for the station owner, who gets dinged with a second transaction fee from the credit card company or the bank.

(This is not the place for a discussion about the fees charged to retailers by credit card companies or banks -- or the difficulty gas station operators have in adhering to the various rules -- but just take it on faith that the rules are complex and the costs can add up quickly, taking a deep bite out of gas station profits.)

Blocks or holds: They may sound like something out of a football game, but aren't nearly as entertaining. Because gas station operators and, often, hotel owners, restaurant managers and some other retailers may not know at the outset exactly how much you may be spending, credit card companies and banks block or hold a higher amount than you may end up needing.

In the gas station world, these blocks typically range from $50 to $100 and they can last for up to three days (even longer in some cases), walling off your financial resources until the blocks expire.

This only is a problem for credit card users if they already are nearing the limit of their available balances. If you have $10,000 in available credit, a $100 hold isn't going to materially affect your life.

But this more frequently can be a problem for debit card users, who typically carry relatively low balances in their linked bank accounts, so here's an important tip:

If you use a debit card to buy gas, try to do so at a place that requires PIN numbers. This will -- or at least should -- wipe out the hold within seconds of the completed transaction.

Experts also advise consumers who may have questions about holds to check with their banks or credit card issuers, especially if a hold is lingering on their account for more than three days. And if you are unsure about the effect of holds, blocks or limits, just use cash for your transaction -- if you still have any, given the high prices we all are confronting.

In any case, it is important to keep in mind the various, modern day complexities of buying gasoline at the pump, aspects that have been kept out of sight, retailers say, more as a matter of convenience than conspiracy.

"We don't sell just gas or snacks or drinks," Lenard said. "We sell convenience. Our jobs are to provide service that gets you in and gets you out fast, if that's what you need."

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