"The gas pump, when you put your debit card in, will automatically put a hold for a significant amount of money for each transaction," Lewis said.
In this case, the hold amounted to $150 for both transactions.
"What they are doing is they're going to verify that is a good or valid debit or credit card that you're putting in their pump, and so what they will do is, they will do an authorization," said Dave Whelan of Commerce Bank.
When you slide your debit card, the pump can put a temporary pre authorization hold on your account, because it does not know if your account is active, or if you have the funds to cover the amount of gas you will ultimately buy. With all of the warnings, directions, and ads on a pump, there is no warning of a temporary hold. Conoco-Philips says "There are a number of state and federal posting requirements, but informing customers of possible holds is not one of them."
While gas stations require the pre-authorization holds, a number of factors determine the total amount of the hold. The holds placed on accounts will disappear in 12-72 hours as the actual charge goes through.
"If you don't use the pin, then it gets into the company itself, it may be the gas company, Shell or Amaco, that sets the amount, the card company, your bank, or the interchange group that handles the transfer between the retailer and the bank, so all of these are factors in this," said Bill Ratliff, of the Missouri Bankers Association.
Ratliff says as the technology of electronic money transfer evolves, so will the holds, and they may eventually disappear. Temporary holds vary from one dollar to a hundred, so banks and gas stations recommend paying with credit at the pump or use a debit card or cash inside with an attendant to avoid a temporary hold. They say the only way to be sure if a hold will be placed on your account is to ask the business or your financial institution
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When I first received the tip about temporary holds when you use your debit card at the pump, I thought it wouldn't be too difficult to get to the bottom of it. After two weeks of research, interviews, and phone tag, I found the issue to be much more complex than I anticipated.
I talked with the Lewis family about the problems they encountered as a result of the temporary hold placed on their checking account after they filled up at the pump. My initial thought was that the gas stations set a hold amount and placed it on your account once you swiped. After making a lot of phone calls to banks and gas stations, I found a lot of people don't know exactly how the holds work. Many gas station attendants had no idea what I was talking about. Some gas companies said it was always set by the bank, and some banks said it was always set by the gas station.
Bill Ratliff of The Missouri Bankers Association finally cleared everything up. He explained that most temporary holds are set in the contract between consumers and the financial institution when you set up a checking account with a debit card. Ratliff also said that electronic money transfer can be confusing, and in different situations, the gas company or the company that handles the electronic transfer can set the hold amount. Basically, there are many factors at play here.
The process of preauthorization temporary holds is legal and has been in practice since debit cards were introduced in the early nineties. Holds are not unique to gas stations, as they are also common practice at hotels and restaurants. At these businesses, the final total is not set in stone, so a set amount of money is held to ensure they get their money.
Most of the people I talked to said they do not receive many complaints about the practice, since most people have the funds to cover it, or the hold drops before they even notice. Some holds drop within minutes, but it could take up to four days. When I used my debit card at the pump, I checked my balance online and found a hold for one dollar in addition to the amount of gas I purchased.
It makes sense to have a hold to ensure businesses get their money, but it doesn't seem fair the only warning lies in the fine print of a debit card contract. If you are charged an overdraft fee, because of a temporary hold, talk to your bank since all service fees are up for review. The banks I talked to said they would be willing to reconsider service charges resulting from temporary holds. The Lewis family bounced a check because of this, but their bank did refund the charge once they explained the situation.
If I had to give advice from the many people I talked to in order to avoid holds on your account, stick to cash or credit at gas stations, hotels, and restaurants.