Gas prices aren’t the only thing going up when you pay at the pump in the summer of 2022.
Thanks to new policies from Visa and Mastercard, the temporary financial holds on the debit or credit cards you use to pay for gas also are on the rise — by as much as 40%. The new limit is $175.
Though those funds don’t actually leave your account, the hold could cause you to have trouble with overdraft fees on a debit card or impact spending limits on a credit card.
“When you use a debit card at pay at the pump you may find that as much as $175 of your available balance in your checking account will be unavailable for up to four days,” money expert Clark Howard says. “That could cause items for which you’re trying to pay to bounce.”
In this article, I’ll explain how this works and offer some solutions to ensure you’re not negatively impacted by the changes.
New Policy Allows for Increased Gas Station Holds
As the national average price for gasoline hovers near $5 per gallon, it’s as expensive as ever for Americans to fill their gas tanks.
The total cost of a tank of gas exceeds $100 for many types of vehicles in some areas of the country.
This increase in costs has spurred major card transaction companies, including Visa and Mastercard, to take action to ensure “pay at the pump” transactions are completed accurately.
According to a recent report from The Wall Street Journal, both Visa and Mastercard have raised the limit that gas stations can hold on your card to $175.
Until the 2022 increase, that was limited to a maximum of $125 per swipe with a Visa or Mastercard.
Note: Gas stations can set their own limits for card holds, meaning they can be far less than $175. This policy change is simply increasing the maximum amount allowed. For example, Kroger has settled on $150 for its card hold limit at its gas stations.
How Does This Work?
When you swipe your debit or credit card to pay at the pump without going to the cash register, the gas station requests a preauthorization on your card to ensure it will receive the funds for the upcoming gasoline purchase.
That usually means there will be a hold placed on your account for what the station deems to be a “high side” estimate of your purchase.
Many consumers don’t even notice this hold, as it’s temporary and doesn’t access your funds until the gas station knows the correct amount to charge you.
Let’s talk through an example.
You pull into your nearest gas station to fill your tank. You swipe your card in anticipation of starting your transaction. Shortly after that, you probably get a message on the screen at the pump that indicates the kiosk is authorizing the transaction before you are able to grab the nozzle and begin filling your tank.
That’s when the hold is placed on your card.
If you were to check your online account statement for your card shortly after you swiped it, you’d likely see a “pending transaction” of up to $175 from the gas station.
Let’s say you finish your fill-up, and it costs $80. That $175 hold will eventually be replaced by an actual charge to your card of $80. The gas station never really took $175 from you.
But in the time it takes for the transaction to go from pending to complete — which could be a day or two — your bank or lender will treat your account as though the full $175 is spoken for. That’s where you could run into trouble if your debit account balance is low or your credit limit is almost maxed!
Why Do Gas Stations Do This?
The short answer: to protect their own financial interests.
The Wall Street Journal made an apt comparison in its report on the hold limit increase:
“Card holds work like security deposits,” WSJ’s Ayse Kelce explained. “Banks allow merchants such as gas stations to use these preauthorization holds to ensure that customers have enough money in their own account to settle payment when the transaction is complete.”
A Visa spokesperson told WSJ that $125 simply is no longer an adequate limit for some gas stations.
Many consumers are now paying more than $125 for a tank of gas, and if the preauthorization hadn’t been raised, the gas stations would be taking on the financial risk that customers actually had enough money to cover the difference.
At $175 for a hold, gas stations now can comfortably sell approximately 35 gallons per transaction (at near the national average price) before approaching the hold limit.
“If you go inside at the gas station and say ‘I want 20 bucks on Pump 6,’ then they’re not going to do this,” Clark explained on the gas-related card holds. “But if you just get an authorization at pay-at-the-pump, they don’t know how much gasoline you’re going to pump. That’s what leads to them temporarily making these funds unavailable in your life.”
What Consumers Should Do in Response to This Change
So how can we limit the damage this new policy could do to our financial lives? Team Clark has a few tips to help you navigate this situation.
1. Use a Credit Card Whenever Possible
Clark has long held the stance that you should avoid using a debit card to pay for anything.
This situation is a prime example of the superior consumer protection you can receive by using a credit card: Your actual money is held hostage in your checking account if you get a debit card hold at the pump, whereas you’re only temporarily losing hypothetical spending power with that same hold on your credit card.
An added bonus is that you could earn rewards for using a credit card to pay for your gasoline. For example, the Sam’s Club (5% back) and Costco (4% back) credit cards offer meaningful cash back rewards for gas purchases.
And with prices where they are, that could be an extra $5 back in your pocket after a $100 fill-up.
2. Pay Inside if Using a Debit Card
As Clark mentioned earlier in this article, the card holds for gas purchases are only applied to pay-at-the-pump transactions.
If you walk inside the gas station and ask to prepay for a certain amount of gas, the station will charge your card only for the amount of gas you purchase. No hold is necessary since you’re paying in full before you pump.
3. Know Your Balances Before You Go
Life is busy, and sometimes you forget to use the right card or don’t have time to stand in line to pay inside.
That’s why knowing your balances before you decide to stop for gas will help you avoid some potentially painful overdraft fees or insufficient funds notices.
Use only a debit card or credit card that has the cushion to comfortably float a $175 hold against it for up to four days. If you don’t have one of those available, you may want to consider paying the old-fashioned way: with cash.
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