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Gas station debit card OVERcharge
June 19, 2005 10:19 PM   Subscribe

Never use a debit card to pay at the pump: "Each day millions of Americans use their debit card at gas stations to "pay at the pump." What you probably do not know is gas stations have the right to overcharge you a certain amount to ensure they get their money. Each gas station decides how much to overcharge and hold on your account. Some put a $75 or $100 hold on the account while others only hold $5 or $10. But, these stations also decide how long to hold that money. Some hold the money for up to three days. . ." How is this even legal? Am I the last schmuck in the U.S. to find out about this? I just found out that Sam's Club (for example) charges $50 and deposits your change three days later.
posted by spock (94 comments total)

 
The quote above is from this Snopes page (near the bottom).
posted by spock at 10:20 PM on June 19, 2005


I understood that they place a hold on your card, but dont actually take money. There is a big difference.
posted by SirOmega at 10:28 PM on June 19, 2005


I understood that they place a hold on your card, but dont actually take money. There is a big difference.

There is if you're sitting close to having no money in your account, right? - if you have $75 in your account, buy $25 worth of gas, and they hold an extra $50, then you go to the store to do some shopping. . .
posted by Jimbob at 10:31 PM on June 19, 2005


I imagine that they do this for credit cards to, it's just harder to notice. It's not a charge though, as the snopes piece makes clear. Where's the story?
posted by dial-tone at 10:33 PM on June 19, 2005


Well, the story is, if you're using a debit card, and you have $100 dollars in your account, and the gas station puts a hold on your card for $75 dollars and doesn't release the hold for 3 days, it means that you *cannot* access anything but $25 from your account for 3 business days. The gas station has the rest locked down and untouchable until they release it...which, as articles have noted can take some time.
posted by dejah420 at 10:37 PM on June 19, 2005


Spock has been most illogical of late.
posted by interrobang at 10:37 PM on June 19, 2005


$21 dollars at the local Jiffy... I hear ya!
posted by TangerineGurl at 10:41 PM on June 19, 2005


Ah I see what you are saying. I guess its why I always use my AmEx card to pay for gas.
posted by SirOmega at 10:41 PM on June 19, 2005


A hold is effectively a charge, as is made clear in the Microsoft Money article. Say you are coming home from college with $55 in your account. You pay for $20 gas at the pump, leaving you (you think) with $35 in the account. Not home yet and needing gas again, you stop for another $20 in gas. Your card will not authorize at the pump. Now aren't you glad it wasn't a charge?

The solution is (apparently) to choose to Pay Inside with the card. But it would be really handy to know that, dontcha think? With all the laws on labeling (particularly for financial things - like ATM machine bank charges, etc.) how can they get away with not having this stated on the pumps?
posted by spock at 10:42 PM on June 19, 2005


This is pretty standard for anything you present a card for in advance or before the total charge is known. Restaurants often put a hold on the bill+40% because they don't know how much you'll tip and they need to make sure the transaction will clear for whatever you sign off.

A hold is not effectively a charge, except in the sense that the money is not available. A hold will expire automatically, and the gas station does not actually have access to that money at any time (they have no incentive to maintain the hold, unlike, say, a bank holding a check for a week).

It does seem ridiculous that the hold is not cancelled immediately upon completion of the transaction, especially considering that the whole process is automated, but that often has as much to do with the credit issuer as it does the gas station.
posted by Nothing at 10:50 PM on June 19, 2005


how can they get away with not having this stated on the pumps?

It's not only gas stations that do this (as stated in the snopes piece). I've personally never had a hold more than $20 put on by a gas station (I believe the average has been usually a dollar). Does anyone here have anyone thing more than a second story that gas stations are holding more than a reasonable amount.
posted by dial-tone at 10:52 PM on June 19, 2005


This problem has existed since, oh, at least the 80's. Run the card as "Debit" instead of "Credit" and punch in a PIN. Problem solved.
posted by esoterica at 10:52 PM on June 19, 2005


BTW, running the transaction as "Debit" also solves the opposite problem -- that if the station only holds $1 until the charge goes through, your online account balance will reflect too much money in your checking account for up to a week. Using "Debit", the correct amount comes out immediately.
posted by esoterica at 10:57 PM on June 19, 2005


Please read the articles before posting.

"If you use your debit card at a pump that does not require a PIN, the station regularly will block out an amount -- often $50 or $75 -- on your card."
posted by spock at 11:00 PM on June 19, 2005


man, how poor are you guys? I never have less than $2000 in my checking account or else I get raped for fees by my bank.
posted by jonson at 11:04 PM on June 19, 2005


Speaking for myself, I'm quite poor, but thanks for sharing, jonson!
posted by spock at 11:08 PM on June 19, 2005


The solution is (apparently) to choose to Pay Inside with the card. But it would be really handy to know that, dontcha think? With all the laws on labeling (particularly for financial things - like ATM machine bank charges, etc.) how can they get away with not having this stated on the pumps?
How can you not know this already? The simple solution is - if you generally cut things fine with your account balance, don't use the pay at the pump facility, then you have no problem. Did it ever occur to you to wonder how they know you had enough money to pay without doing this, given that they have no access to your account balance?

*plans to rob johnson's house, as he is obviously a rich bastard and deserves it*
posted by dg at 11:11 PM on June 19, 2005


spock,

I did read the article. And a pump that "requires a PIN" is different from a pump that allows you to choose (as virtually all that I've seen do).
posted by esoterica at 11:26 PM on June 19, 2005


What percentage of people steal gas? No, wait, what percentage of people with debit cards that validate steal gas? OK, what's the bottom line loss to the sweet-ass corporations for that theft? What's that expressed in percentage of gross pump sales? Net pump profits?

I just used my clairovoyant powers to determine that it is infinitesimally small. Why do they want to crush people.

And as for the raw cost of the theft, how does it relate to the cost of implementation for this "feature", plus the cost to come up with the idea, presentation, meetings, discussion...

This is the trend is that They are willing to do really strange things to save a few dollars here and there, really strange being defined as things which really annoy people.

At this point, they could save more money by laying off the bean counters and the cost cutters. These are people who are sitting at their desks, with very little real work to do, and they stare into an entirely different blue sky than most people, when their imagination takes to flight. As long as they have jobs it will keep happening.

Speaking of this insane, demonic striving to save money, why is it so important? Thinking in terms of the macro picture, wealth creation, inflation, etc, what is the use in investing so much time, effort, and in fact placing a strain on people, in order to save a couple dollars? Actually like 0.00001% here probably. Like, people will deride a lot of professions for being somewhat pointless, but these people that are 110% on applying the brakes, so to speak, what is causing this to happen? Corporate strategies don't just come out of thin air, no matter how much it looks like it sometimes. And on that high level, where the strategy and doctrine gets hammered out, nothing is without reason. (whether or not the reasoning is good, whether or not it's open to debate...)

It's the same thing though, you turn on the news, and every day they are finding some little guy to totally blast. I guess there must be a bottom line increase to value of the dollar if we can turn our society into Survivor Island or The Running Man. It's really funny when you think about it how many people have been putting effort into developing that very vision over the last few years. I think back and some of those people who are periodically called out as heartless scumbags definitely have been working on it.
posted by nervousfritz at 11:41 PM on June 19, 2005


Why do they want to crush people.

It's quite simple, really. The longer they hold on to your money, the more they can make for themselves. Even if it's only a fraction of a cent, the numbers can add up quickly.

In a bank's ideal world, everyone puts their cash in, but no one ever takes any out. That gives the bank an enormous amount of capital to play with. If you are actually greedy enough to want your money back, say, in the form of a check or ATM cash, well, you better believe they're gonna charge you for it.

My bank (but not for long) charges me every time I use debit payments. Not "holds my money," but "takes my money." So when I'm in a town with no Ocean National ATM, I can either take out money at a competing bank's ATM ($2.00 fee for the local bank + $1.50 fee to my bank), or I can go into a grocery store and buy a pack of gum, then use my debit card to get "cash back" (+ $0.25 fee to my bank).

Like I said, they don't want you to spend your money. They want to spend your money.
posted by Civil_Disobedient at 12:02 AM on June 20, 2005


Regular market economics apply. Profit actually comes from exploiting an inefficiency; the inefficiency usually occurs because an agent has incomplete information. Most consumers don't know that these holds are being placed on their funds and thus the merchants can greatly overcompensate for their risk...and they usually will. In theory, doing so is itself informative; and in this case, those holds which seem to be excessive and make no sense are excessive and make no sense and they are telling the consumer that their ignorance is being exploited. Now we're aware of it and talking about it, and presumably through competition among merchants the holds or practices will move in the direction of being proportionate to the merchant's risk and less excessive.

Of course it doesn't always actually work that way.

Americans are moving in the direction the Europeans have been going for years now and beginning to prefer debit card transactions that are close to being virtual cash transactions. They're not, though, and we don't use smart cards or other things that make the transaction very cash-like but still convenient. Nevertheless, this convenience is, I think, what people strongly expect and merchants and financials insitutions will be forced to satisfy those expectations.

On preview: "My bank (but not for long) charges me every time I use debit payments. Not 'holds my money,' but 'takes my money.' " You and your bank use a a third party like Visa to process those debit charges and they are passing along that cost. Or, if it's with using an ATM card as a debit card with a retailer, it's again because some third party that is doing the processing is charging them for it. Of course if they do this in house, it's still going to costs them something. On the other hand, that something might be less than it is to process, say, checks.

I think there's inefficiences at all levels in these markets, for various reasons. Near monopolistic situations, consumer ignorance, even irrational tradition. It seems to me, though, that they're slowly working themselves out.

It's hard to know what is actually "fair", but it seems to me that the baseline should be how much a consumer has been charged, on average, for transactions via checks. I can't imagine that there's any way that the collective cost of processing electronic transactions is larger than those of processing physical checks. But note that you pay one way or another even for writing checks. Either an explicit fee, or in the interest you're not earning on a maintained large balance.
posted by Ethereal Bligh at 12:20 AM on June 20, 2005


I, too, am glad to see this bit of information. One more reason to eschew debit cards. I'll let my credit card company carry my debts for 30 days, thank you very much. Why shouldn't I keep my money (and the interest it accrues) in the mean time? I really don't see the upside of debit cards, unless you're the kind of person who cannot pay off your card at the end of every cycle.
posted by squirrel at 12:28 AM on June 20, 2005


spock:
Say you are coming home from college with $55 in your account. You pay for $20 gas at the pump, leaving you (you think) with $35 in the account. Not home yet and needing gas again, you stop for another $20 in gas. Your card will not authorize at the pump.

And I think it should be noted that most banks (or third parties, as it were) do approve the advance, regardless of account balance, and charge another fee for insufficient funds.
posted by jono at 12:53 AM on June 20, 2005


A hold is not effectively a charge, except in the sense that the money is not available.

Well, for 3 days it is a charge in all but name. For those 3 days you do not have the money, someone else does and is using it for their purposes, not yours, specifically to generate interest for themselves. After the 3 days they give control of the money back to you.

In other words it's a loan. Which you didn't even know was happening. Do you remember agreeing to loan anyone money or negotiating terms such as the interest rate you're charging (zero percent apparently)? One may well wonder, how can this be legal?
posted by scheptech at 1:37 AM on June 20, 2005


Hmm..AmericanFilter again.
posted by salmacis at 2:02 AM on June 20, 2005


"Am I the last schmuck in the U.S. to find out about this?"

yes.... have you been living under a rock?????
posted by HuronBob at 2:10 AM on June 20, 2005


HuronBob beat me to it.
posted by fixedgear at 3:32 AM on June 20, 2005


I think I've been lucky. I've noticed some gas stations around here holding $1 - $10, but not anything like $25 - $75! I've lived paycheck to paycheck where I spend money on gas and then go spend the rest of it on groceries. I've never had a problem with funds not being available.
posted by lynda at 4:14 AM on June 20, 2005


Thank you for this useful information. I am new to debit cards and gas pumps.
posted by nickyskye at 4:46 AM on June 20, 2005


But this is about credit cards and gas pumps.
Personally, I've only noticed issues with respect to restaurants and tipping when doing debit transactions; I've never seen a hold for the incorrect amount of a gas purchase.
posted by Doohickie at 5:01 AM on June 20, 2005


I bank at Wachovia and their online banking allows me to see holds, that is, debit transactions that have not 'processed'. Transactions requiring pins, say Publix or CVS, are processed immediately. Transactions without pins are listed on a separate page, "View Holds", and they sit there for days, so I know what is happening at any given moment.

The interesting part for me is that gas stations where I don't punch pins don't appear as holds at all for days, and my available balance is not affected until they are processed. So, what is Wachovia doing different?

BTW, the worst hold offender I have encountered are those movie rental machines. The one I used held $100 more than the rental fee throughout the rental period and for an additional 3 days AFTER I returned the movie, and both the rental and the return required a pin. Needless to say, I do not rent movies from machines any more.
posted by mischief at 5:26 AM on June 20, 2005


have you been living under a rock?????

No, but I live in Nebraska: the next best thing to it.

I joke because I love.
posted by spock at 5:56 AM on June 20, 2005


"or else I get raped for fees by my bank"

Goodness, man, where do you bank!? Minimum balances are so last millennium.
posted by mischief at 6:19 AM on June 20, 2005


Umm, this is really common when you use a debit card w/out entering your PIN, not just at gas stations.


On Preview: yeah, other people seem to know this as well.
posted by Steve_at_Linnwood at 6:23 AM on June 20, 2005


I've never seen a hold on my account for more than $1.00 or the amount of the transaction, and we nearly always pay at the pump. The one time I did get double-charged by a chinese place, the funds were corrected back by the system within about three days.
posted by Medieval Maven at 6:29 AM on June 20, 2005


It appears I've always had just a $1.00 hold on my account when I get gas [regardless of brand]. I've been paying at the pump since forever. And I've been in situations [years and years ago] when I didn't have $75 in my account to get the hold authorized.

The tradeoff for the gas station is either put a hold through for a huge amount [but not really, if you think of a Ford Excursion fueling up with super unleaded, I'm sure it take >$75] or run the card for a buck to see if it is an active account. Do they want to piss off otherwise good customers for the inconvenience of the hold or protect themselves from theft? Which happens more often. The smart places will run a buck through.

If I did see a hold on my account from a gas station for $75, I'd find another gas station out of principle next time.
posted by birdherder at 6:31 AM on June 20, 2005


I'm just glad that our government is busy looking out for the poor credit companies. Us evil consumers have been terrorizing those big lovable goofs for way too long, don't you think?

I know - this is a gas station conversation and not about bankruptcy - but it's always good to know that our corporations (both energy AND credit) are being protected...


posted by PrincessRue at 6:49 AM on June 20, 2005


This is also common practice when you order items online. A good deal of my day job consists of explaining all of this to customers and banks. Yes, sometimes it's news to banks as well.

Most banks just drop the authorization after a couple of days, but not always. Some want a phone call from the customer, some want one from the merchant, some want to talk to everyone even remotely involved with the transaction. One card provider that would be familiar to most people will not remove an initial authorization AT ALL until the merchant submits a fax to them with all the gory details.

As a result of what I've seen? I don't use a debit card without a PIN -- and when I'm online, I use an ordinary credit card.
posted by gnomeloaf at 7:08 AM on June 20, 2005


I had second thoughts about posting this, but I'm rarely one to avoid running my ignorance up a flagpole, particularly if I think it may help someone else. I've learned quite a bit more thanks to posts like gnomeloafs.

Apologies to the international MeFites for the USA-centric nature of the post.
posted by spock at 7:22 AM on June 20, 2005


Rofl let's put an American Filter on the internet so it isn't worth using anymore.
posted by wakko at 8:02 AM on June 20, 2005


You people still use banks? Try a credit union instead. The fees are lower and the tellers friendlier.
posted by faceonmars at 8:04 AM on June 20, 2005


"the tellers friendlier"

You still use a teller?! ;-P
posted by mischief at 8:09 AM on June 20, 2005


Yet another reason why I never use my debit card anywhere but in my own bank's ATMs. Instead, I charge things and pay it off every month.

In case you wonder why they push them so hard ... you do know that Visa & MC make more in fees from debit cards than credit cards, right? Like they're not making enough money already.
posted by pmurray63 at 8:21 AM on June 20, 2005


hey guys, it is utterly ridiculous that a website owned by an American and hosted in America has an America-related post now and then. let's crap up the post with griping. oh btw, apparently metafilter = the internet now.
posted by keswick at 8:24 AM on June 20, 2005


I use debit cards at the pump and never have more than $10 held.
posted by angry modem at 8:44 AM on June 20, 2005


man, how poor are you guys? I never have less than $2000 in my checking account or else I get raped for fees by my bank.
posted by jonson at 2:04 AM EST on June 20 [!]


You only have $2,000 in your checking account?
Man, that's pathetic. I made sure to have my lawyer keep over $50,000 in my main account (divested from the trust fund, of course) so as to ensure no fees, anytime.
/sarcasm

Seriously, who would assume everyone has that much in their account? Almost everyone I know lives paycheck to paycheck, and last figures I've heard, people are saving less, spending more (following the orders of the prez and keeping that economy going, ya know?)

As for the putting of holds on one's account, it's not exactly news, but it's a bit disturbing, no doubt. The more loosey-goosey people are with managing their money, the more opportunities for them to have money slip through their fingers.

Fleet bank was by far the worst with their checking account policy: You buy something, the money is subtracted from your account. This is a hold, though. If the money is not claimed in those 3 business days, Fleet would return the money to your available balance, though the business you paid has at least a year to deduct that money at any time of their choosing. I can't count how many times Fleet charged me for having my account go negative as I'd deposit a paycheck, pay the rent, and some purchase from a store would put me under balance by a few dollar, incurring $100 of fees. The funds are there, but by juggling the deposit/withdrawl times correctly, they made a lot of money using this practice. A pox on the programmer that figured out that algorithm.

And yes, I fully understand that a meticulously maintained checkbook would have prevented such a thing. But it sucks to not be able to take your statements for the ACTUAL amount in your bank (kind of hard to set things right, once the variables are spread throughout, maturing at random.)
posted by Busithoth at 8:49 AM on June 20, 2005


you do know that Visa & MC make more in fees from debit cards than credit cards, right?

If you use your PIN, merchants pay less than if you use it as a charge. That's why some merchants used to force you to use a PIN if your card had one. Then the credit card companies complained, and merchants were forced to allow people the choice. The fee for merchants should be the same as a credit card (as it's using the same network) and I imagine that merchants would balk at having to allow Check Card transactions if it would cost them more than a credit transaction.

When I worked in retail, people would complain about the fees their bank would charge if they entered their PIN. I always wondered why these people didn't just change banks. Entering a debit with the PIN usually keeps your balance more instantly accurate (if you view your account online).

posted by dial-tone at 8:53 AM on June 20, 2005


/sarcasm

Man. The poor are bitter these days. No wonder I never associate with you people in the real world.
posted by jonson at 8:53 AM on June 20, 2005


man, how poor are you guys? I never have less than $2000 in my checking account or else I get raped for fees by my bank.
posted by jonson at 2:04 AM EST on June 20 [!


hahahahahahahahahahahahahahahahahahaha!

methinks you need dragged into the real world!

At the end of a month I'm lucky to have 2p in my account never mind a grand!
posted by twistedonion at 8:57 AM on June 20, 2005


lol! you just beat me to it Jonson - as you say yourself - you don't live in the real world... just you wait till the revolution when we go commie on your rich little ass
posted by twistedonion at 9:00 AM on June 20, 2005


Picturing troll jonson hitting Refresh on this thread since 11:04 PM PST last night. Busithoth's comment finally made it pay off, eh? Woo-hoo!
posted by spock at 9:02 AM on June 20, 2005


a debit card does not indicate credit worthiness. How can the gas station ensure you have the money you say you do? With credit cards, you are vouched for by the credit issuer. This is not true of debit cards.

From a business perspective, they need to make sure you have the money you say you do when you purchase gas. Hence the hold. Don't like it? Then use your credit card, which costs the gas station around $2.50 more per transaction over debit cards, and make their lives worse.

Repeat after me: A debit card is NOT a credit card.
posted by Dantien at 9:15 AM on June 20, 2005


lol! you just beat me to it Jonson - as you say yourself - you don't live in the real world... just you wait till the revolution when we go commie on your rich little ass

Believe me, I definitely don't live in the real world. I live in Los Angeles. I think the median housing cost in my zip code is just below a million dollars. How someone could live near here and be worried about a two day hold of between $10 & $50 on their account is inconceivable. But then, so is how someone could afford a computer & internet access while still worried about a two day hold of what amounts to less than I would spend on dinner, and yet spock & others here seem to do it. As for the revolution, believe me, I'd be about 6 millionth on your target, even if you just focused on Los Angeles alone.
posted by jonson at 9:22 AM on June 20, 2005


For those 3 days you do not have the money, someone else does and is using it for their purposes, not yours, specifically to generate interest for themselves. After the 3 days they give control of the money back to you.

Just to be clear, the gas station does NOT earn interest on money that is in a "hold" status. The gas station never touches that money, never gets interest off it, can't use it for their purposes. I say this as somebody who used to work in retail and put in holds for phone orders until we'd shipped the product and charged the card. We didn't have any access to the money. If anybody had access then it's the bank or the credit card issuer, not the merchant.

The gas station does NOT profit from larger holds. They reduce theft from larger holds since there are no shortage of people who would figure out to fill up their RV at a station that only has a $1 hold and pay with a bad card.
posted by thedevildancedlightly at 9:29 AM on June 20, 2005


they need to make sure you have the money you say you do when you purchase gas

Which takes all of two seconds these days. The hold is completely unnecessary. The fact that your PIN is verified shows that the merchant's system is "talking" to your bank. What, the system can verify the PIN, but can't look at your balance? HA!

A debit card is most definately not a credit card; thus the cost for the privilege of using it should be precisely zero. The bank isn't fronting you money like a true CC.
posted by Civil_Disobedient at 9:30 AM on June 20, 2005


What, the system can verify the PIN, but can't look at your balance?

As stated above, it doesn't put a hold on if you use your pin.
posted by dial-tone at 9:38 AM on June 20, 2005


jonson: You really don't live in the real world. I know plenty of college kids and young people, myself included, who live paycheck to paycheck and don't really have a lot of money lying around. A lot of people in this thread, and a lot of people in this COUNTRY, much less this PLANET, have never had $2,000 at once in their entire lives. But we can afford internet access because we, get this, we rent our housing in groups, from people who own houses, and we split the costs! There's no way I could afford rent, internet, car stuff, electricity, food, etc. by myself, which is why I'm lucky to have three awesome roommates who can help me get by.

How someone could live near here and be worried about a two day hold of between $10 & $50 on their account is inconceivable.

I'm glad that you and your pea-sized perspective are lodged squarely in la-la-land. We need less people like you out here in the real world.

The worst thing about privilege is that it has no perspective. Thanks for being such a great example.
posted by baphomet at 9:41 AM on June 20, 2005


Actually, speaking from example, the worst thing about privilege is the sniping envy from the poor. Then, the constant struggle to maintain that privilege by opressing others. Then, 3rd would be the lack of perspective.
posted by jonson at 9:52 AM on June 20, 2005


This is news to me and pretty underhanded really. But I stopped using my debit card for transactions a while ago. Now I use a card with a rewards program on it to keep adding to that instead. No biggie either way now.

Also, if you shop at Sam's Club or WalMart, you're only getting what you deserve.

jonson, many people, if not most, do not have the luxury of a two grand balance to keep in their account. Many people have to exist from check to check. But good for you.
posted by fenriq at 9:54 AM on June 20, 2005


You clearly get a kick out of inciting envy, jonson. There can be no other purpose to your original comment. The worst thing about privilege is how it tends to make people dicks.
posted by spock at 9:57 AM on June 20, 2005


What, the system can verify the PIN, but can't look at your balance?

A touch off-topic, but do you really want the gas station to know your bank balance? That seems more than a bit of an invasion of privacy. I'd be a little hesitant to have the gas station start pushing paycheck loans and slim jims on me if I have a balance under $100, and pushing Evian and mortgages on me if I have a balance over $10,000. And forget what happens when the guy behind the counter gets access to my bank balance. No, I'd prefer the hold, personally.

That said, again, THE GAS STATION DOES NOT HAVE ACCESS TO MONEY ON HOLD. THEY DON'T PROFIT FROM IT. Your bank might, but the gas station doesn't.
posted by thedevildancedlightly at 10:07 AM on June 20, 2005


A debit card is most definately not a credit card; thus the cost for the privilege of using it should be precisely zero.

That also doesn't make sense. So building the network to process debit transactions, securing it, and processing each and every transaction that comes through is absolutely costless? The point-of-sale costs are zero, the customer-support costs are zero, manufacturing the cards is zero, and investigating fraud is zero? There are more costs to credit cards than just "fronting money" -- normally those are paid by the merchant for credit cards, but consumers have to pay for debit cards.
posted by thedevildancedlightly at 10:10 AM on June 20, 2005


Actually, speaking from example, the worst thing about privilege is the sniping envy from the poor. Then, the constant struggle to maintain that privilege by opressing others

I love you.
posted by keswick at 10:10 AM on June 20, 2005


Here's something that I've always wondered about "Pay at the pump:"

Say you have a debit card. Any place you use this debit card, you will be asked for a signature or PIN. In addition, I believe they're also supposed to ask for your ID, although I can probably count on one hand the number of times that I have experienced this in the past year.

Now, a "Pay at the pump" machine will ask you for none of the above. All you need is the physical card. How do they get away with this?

(I should put a disclaimer on this - I've been reliant on public transportation for the past two years, so it's possible that this may have changed.)
posted by afroblanca at 10:20 AM on June 20, 2005


Maybe you kids just don't have the perspective to understand it's not that uncommon for gainfully employed grownups to maintain a $2000 balance, especially if it's one of their specific goals, and that the "real world" is not characterized soley by your own misery. Also a sense of humor might be helpful in this situation, or at least a bit of calm.
posted by thirteenkiller at 10:24 AM on June 20, 2005


Now, a "Pay at the pump" machine will ask you for none of the above. All you need is the physical card. How do they get away with this?

Most debit cards work on both the debit and credit networks. The end result is the same, but they are processed differently. So, if you are not asked for a PIN then your debit card is being run as a credit card. At a lot of gas stations you have to go out of your way to run it as a debit card. Many banks will allow you to turn off the credit network access feature.

That said, it's worth looking into which is better for you -- sometimes running it as credit is cheaper, sometimes as debit.
posted by thedevildancedlightly at 10:25 AM on June 20, 2005


There is a really really easy way to avoid all of this, if you think the evil gas stations and credit companies are out to get you:

Pay cash.
posted by Steve_at_Linnwood at 10:26 AM on June 20, 2005


So, if you are not asked for a PIN then your debit card is being run as a credit card.

Well, my concern is not necessarily how the card is being treated, but mainly about authentication. When you pay at the pump with a debit card, they are basically asking for no authentication at all, other than posession of the actual plastic. To me, it would seem that there would be a far greater danger from stolen cards than from honest people who don't have the $20 in their account or whatever.

(And now that I think about it, even when you use a standard CC, it's not like the "Pay at the pump" machine asks for a signature. WTF?)
posted by afroblanca at 10:37 AM on June 20, 2005


but do you really want the gas station to know your bank balance?

The gas station doesn't have to "know" your balance. The system merely checks the balance, then tells the gas station "yes" or "no".

So building the network to process debit transactions, securing it, and processing each and every transaction that comes through is absolutely costless?

"Processing each transaction" = zero cost once the system is operational, since it's automated. But I accept that the system's construction would cost money to initially implement. But the cost is (theoretically) absorbed by enrolling new customers enticed by your fancy system that's available everywhere.

And Steve_at_Linnwood, how can "they" record your entire life in their databases if you keep paying with cash? Only criminals use cash. /sarcasm
posted by Civil_Disobedient at 10:41 AM on June 20, 2005


Apparently I've been living under a giant rock as well, for I hadn't heard about this. As someone who regularly cuts things close with my checking account, I will be paying inside from now on.
posted by corianderstem at 10:44 AM on June 20, 2005


"Processing each transaction" = zero cost once the system is operational, since it's automated.

Except it's not zero cost. The gas station either has to dial up every time somebody wants to run a card or to keep open a DSL/broadband line at all times. Every month inevitably somebody forgets that they made a charge and calls customer service about it. Customer service is not free. Some of those actually require investigation from a real human being, which also costs money. Of course, on the other side, they have to deal with getting the merchants paid. Transferring money from one bank to another is never free. Of course, some of the merchants will inevtiably have problems that require real live customer support (didn't get the right amount of $, got it late, got it in the wrong bank account, etc). If the bank uses the MasterCard network they take a slice of every transaction (not free). I'm sure I'm missing entire layers of cost since I've only worked on the retail side (not on the bank side), but the point is that it's not free to the bank and even if it were that doesn't mean that you "deserve" it to be free.
posted by thedevildancedlightly at 11:07 AM on June 20, 2005


(And now that I think about it, even when you use a standard CC, it's not like the "Pay at the pump" machine asks for a signature. WTF?)

A lot of places for credit and debit cards do not require a signature for purchase. Usually on stuff under $25 or so. [i.e McDonalds or Starbucks]. They swipe the card, get an approval and you go. The only thing having your signature says is someone signed your signature.

If between the time they swiped the card and the banks finally settle the accounts you overdraw your bank will still pay the charge and then charge the hell out of you for overdrawing. If you don't pay your bank back you they could press charges. The merchant gets its money. The bank gets a nice fat fee from you. You got your cheeseburger.

Still I think the banking system could get closer real-time with having the credit card terminal transmit the final transaction costs when the purchase is complete: i.e. authorize the card for $75 [or whatever the typical price is] and when the customer finishes pumping the gas transmit the actual cost. There's really no need to have a hold on the money that long when this is all done electronically.

I use my debit card everywhere I used to use credit cards and I'm well aware of the holds placed on it. I'll plan for that realizing I can't get to all of my money. But it still pisses me off.
posted by birdherder at 11:13 AM on June 20, 2005


Hmm, I bought gas at Sam's Club with my debit card last Thursday and nothing was held. I didn't enter my pin either, because I'd prefer that Wal-Mart eat the MasterCard processing fee than for my credit union to eat a debit fee. I wonder if this only applies in certain cases?
posted by Dreama at 11:19 AM on June 20, 2005


This is normal and is necessary for charging prior to a complete transaction.

The gas company cannot know how much gas you intend to buy. Your card could be within $20 of being over its limit. If you were to buy $40 of gas with a card that is $20 from its limit the entire charge will fall through, making for a very nasty situation (product dispensed, you're broke, what happens now? You got breath mints and a hose?)

So, the gas company figures out the maximum gas people normally buy ($75 sounds about right for a fillup on a 1 ton pickup truck). If they cannot hold $75 on the account the credit card is considered invalid and the pump doesn't work. No sticky situation, no problems. The money doesn't go anywhere, it's just that you cannot SPEND $75 on that card until the transaction is completed (usually within the same day).

If you are abusing (and yes, I say ABUSING) your credit card so much you don't have $75 left on your limit it's about time you quit buying things with it. The gas station is doing you a favour.

The same thing happens on a debit card, however *that* hold should be covered by your overdraft (you will not pay interest on the hold amount). If you can't get overdraft on your account (my bank provides it for FREE) then your credit must be ruined. I was offered overdraft when I turned 18. I wasn't even in college and had no job.

People with ruined credit need to put their cash in their wallet so they can watch it disappear and micromanage it to the penny. Another huge favour is being done for you by the gas station.

Although what I've said is repeated in the article, if the submitter had READ the article they'd know that it doesn't need to be posted! ARGH! This isn't important info! :)
posted by shepd at 11:24 AM on June 20, 2005


It amused me that paper checks are now (in many places) automatically deducted from your account, but debit cards at gas pumps needs this cushion of up to 3 days. Also, why is there a delay when you deposit your paper pay check (or other paper check at the bank)? Seems like some scam somewhere in there.
posted by edgeways at 12:51 PM on June 20, 2005


Also, why is there a delay when you deposit your paper pay check (or other paper check at the bank)?

The delay involved is due to transit.

The cheque must be carted to the other bank, cleared, then the information that the cheque has cleared must be relayed back to your bank and inserted into your account. This takes time, especially if the bank chooses the review the cheque by hand.

During this time your bank must assume the cheque is rubber, hence the money being unavailable until it is cleared. Of course, again, with overdraft this is unimportant for cheques smaller than your overdraft allowance. You can spend the overdraft with a cheque in transit without paying overdraft fees, assuming the cheque is good. If it's bad you're in the hole.

Direct deposit of salary is preferable, as when the money is deposited in your account, all the transit communication happens instantly. At least in Canada this has almost 100% outstripped the use of cheques for ANYTHING. Even for part-time work I was paid by direct deposit (A cheque was an option if I paid extra administrative charges). Also, at least in service and retail, almost NOWHERE will take personal cheques, and a few places will take company cheques.

The only time I've ever been paid by cheque was for drop-off & payment pick-up (No debit available) or one or two corporate customers who just do it the old way. It's been like this for as long as I can remember (I'm 26). The only thing I've ever used cheques for was to pay the occasional bill that for a company that didn't have an on-site payment location [ex: Credit cards from weird companies].

That all being said, debit cards are VERY different in Canada from US debit cards. Our debit cards do not work in credit card (only) machines at all and require PIN codes. Similarly, our credit cards don't work in debit only machines except if you request that capability from the credit card company and have the magstripe rewritten (unless the credit company already set up the card but didn't tell you the PIN, like MBNA Canada [grrrrr]).
posted by shepd at 1:03 PM on June 20, 2005


This is a long derail, but I really want to chime in on this and I am going to combine my comments to cover some other recent threads. I apologize in advance for the length and I hope my comments don't seem preachy or holier-than-thou. I don't intend them to be. I just want to pass on some hard-earned wisdom to the younger people on this board, who seem to be struggling with their personal finances. FWIW, I am an average Joe who has never made much money in his life and yet, at 47, my wife and I have a house that is paid off, no debt of any kind, short term and long term (retirement) savings, and we lead relatively happy, stress-free lives. Here is my rant:

1. Understand the principle of compound interest. It's the key weapon financial institutions use against you. Once you learn it, apply it to your life, and if you have kids, teach it to them.

2. If you're tin-foil-hatted (as I am), pay for all small daily transactions via cash. When it's not practical to pay in cash (or when making larger purchases), pay with a no-montly-fee credit card. Pay the credit card balance off in full every month. If you are not disciplined enough to pay off the card balance in full every month, read and understand this book. If you still find it impossible to pay off your monthly credit card balance, you are living above your means and bankruptcy is in your future. Do something now, before it's too late.

3. Never (or almost never) pay bank and finance fees. If you get charged a fee for using another bank's ATM, using a debit card (as discussed here), or for just having a credit card, find a way to rectify the situation immediately. Pay cash, move your account to another bank, get a new card, etc. Fees are a slippery slope that must be avoided.

4. Now the hard part: Save and invest. I know it's hard: student loans, high rents, insurances, etc., but let me assure you, no matter how well you are doing, saving money is never easy, so start practicing now. You simply must find a way, even if it looks like you are saving only peanuts. You can't invest unless you save first. If you invest only borrowed money, you are likely headed for a disaster as circumstances change and the loans come due. Very few people win at that game. Mostly, when bubbles burst, those are the people that get crushed.

Saving/investment can take many forms. Standard ways are Real Estate and the stock market but like anything else, these methods are not automatic winners. Waiting to buy a home, saving money in the process, and putting a larger down payment toward the purchase is a form of saving and then investing. Paying off your mortgage early by making an extra payment at the end of the year (from work bonus or whatever) is another way. Maybe your first home will have a rental unit which will provide you with some extra monthly cash flow. Many immigrants seem to know the value of the two-family home and they have generally done well with that strategy. Investing in a home has proven to be a pretty good, long-term method to grow your net worth in the past, so it seems as good as any today (current theories notwithstanding).

If you invest in the stock market for the long term (use MM or other liquid accounts for the short term) put your money in a passively managed fund with low fees (say, Vanguard Total Stock Market fund or some such thing). If you are financial genius and know of better ways to invest your money, go ahead, but know the difference between investing and taking a flyer.

If investing scares you, you can put your money under the mattress, or convert it to gold and bury it in your back yard, or whatever. That is probably not wise, but it's still better than spending it on double-grande-lattes.

5. Even if you do all this, a personal, natural, or societal catastrophe may wipe you out and you may die destitute. Not much you can do about it. Not doing the above because "you are expecting the big catastrophe and why bother?" is not much of a plan, if you ask me.

But you say, "times are tough now and this advice is not practical." Are times harder now than before? I don't know, but these are the times you have to deal with, so try to make the best of the situation. In fact, I would argue that if times are tough, it's even more important to develop good habits, as you are less likely to be carried along in a favorable direction by society's tide.
posted by a_day_late at 1:15 PM on June 20, 2005


Less tin-foil-hat talk more jonson.
posted by guruguy9 at 1:17 PM on June 20, 2005


"my wife and I"

The key words, a_day_late, in your comment. You were lucky enough (I assume) to enjoy a successful marriage, and that can cut expenses phenomenally. Add in divorce, child support, dating and their associated expenses, and that nest egg starts diminishing real fast.
posted by mischief at 1:45 PM on June 20, 2005


The key words, a_day_late, in your comment. You were lucky enough (I assume) to enjoy a successful marriage, and that can cut expenses phenomenally. Add in divorce, child support, dating and their associated expenses, and that nest egg starts diminishing real fast.

I should have said my old lady (20+ years of living together) but you are right, of course, I am lucky any way you measure it. I also appreciate that a few minor turns here and there would have yielded vastly different results. No, this plan is not a sure thing--nothing is in life.
posted by a_day_late at 2:36 PM on June 20, 2005


Well, for 3 days it is a charge in all but name. For those 3 days you do not have the money, someone else does and is using it for their purposes, not yours, specifically to generate interest for themselves. After the 3 days they give control of the money back to you.
Your assertion is incorrect. A "hold" is known as a preauthorization and many of you seem to misunderstand how they work. When you go to the gas station and use your debit card without entering your PIN, some gas stations will preauthorize a predetermined amount. Let's say that amount is $50 and you fill your tank for $30.

What happens after you insert your card is that your card is preauthorized for $50. In essence, the transaction checks to see if you have at least a $50 balance. Meanwhile, your money is locked for a period of time determined by the gas station or the gas station's bank. This can be 0 seconds up to a few banking days. The preauthorization will expire automatically. However it does not automatically count against your balance. Banks differ in how they treat preauthorizations, plain and simple.

In general, as soon as the exact amount of the transaction is known, the preauthorization is expired. In other words, it's not common to see a $50 preauthorization on the account and a $30 purchase. That's not to say it doesn't happen.

While doing work in California, my company picked up the hotel tab. However, when I arrived at the hotel, they asked for a credit card for incidental expenses. I gave them my debit card. They preauthorized my card for the entire amount of the expected tab for the room plus incidental expenses. At the end of the trip, they accidentally charged my account for the full amount. When my card was declined moments later when paying a cab driver, I called my bank. At that point it was explained that two transactions for the hotel were on my card. The first, a preauthorized amount, would not clear for a couple of days. The second, an erroneous charge for the hotel, would not be returned for a few days. However, that is the only occasion on which I have personally witnessed something like this happen.

In the long run, it is best to speak with your bank about preauths. However, the companies that use preauthorizations do not make interest or profit in any way from using them. It is like an insurance policy. Likewise, you are not charged interest for preauths on your credit card.
posted by sequential at 2:57 PM on June 20, 2005


Stop using debit cards for everyday purchases! You wouldn't walk around with every dollar in your bank account in your pocket -- why would you walk around having people every dollar in your bank account on a card? More thoughts in a recent Ask thread...
posted by VulcanMike at 3:11 PM on June 20, 2005


um... handing.
posted by VulcanMike at 3:11 PM on June 20, 2005


Okay. One more thought. You really are handing someone every dollar in your bank account and asking for change when you give them your debit card. Think about it that way. Nobody touches my bank account besides me.
posted by VulcanMike at 3:13 PM on June 20, 2005


Why would you have your every dollar in your checking account?
posted by mischief at 3:37 PM on June 20, 2005


You really are handing someone every dollar in your bank account and asking for change when you give them your debit card.

There's only one difference -- you're not. If someone steals cash, you can't call up your bank and have them cancel it. If someone steals cash, you can't call up your bank and have it refunded to you. If someone steals cash, your bank won't impose a transaction limit or daily limit on their spending. Debit cards will do all these things. They are thus far better than carrying around your entire account. No, when you give someone the card you are not giving them every dollar in your bank account. To really get a lot of your money they will need to know your PIN or be able to forge your signature convincingly.

That said, most debit cards do not give you any cash back on purchases, which makes them less than ideal for daily transactions. A cashback rewards card is better.

When you pay at the pump with a debit card, they are basically asking for no authentication at all, other than posession of the actual plastic. To me, it would seem that there would be a far greater danger from stolen cards than from honest people who don't have the $20 in their account or whatever.

The merchant is basically agreeing to eat the transaction if it is challenged. If they can't produce a signature for a credit card, they're out the money. They do this because paying at the pump is a convenience customers demand -- I personally won't go to a gas station that doesn't offer it if I can at all avoid it. At least a merchant can prove the card was physically present (the magstrip has extra "secret" digits specifically to act as proof of a card scan), which puts them one-up on mail-order or Internet merchants.

Of course, the risk is fairly low. if you had stolen someone's credit or debit card, would you go around buying gas and groceries with it? Probably not. You'd go for high-dollar transactions, preferably at a merchant you control, so you can withdraw the money and disappear before the chargebacks start coming in. Still, it costs nothing to preauthorize, so I'm not surprised some merchants do it.
posted by kindall at 3:48 PM on June 20, 2005


I agree with you, kindall. "Try using a rewards card instead" isn't as scary as "Oooga Booga You're Carrying Your Entire Account Around," however.

At the end of the day, my simple point is that it's far more desirable for an overcharge, accidental charge, repeat charge or even fraudulent charge to come out of your credit line than from your wallet.
posted by VulcanMike at 4:19 PM on June 20, 2005


Hey, apart from the always appropriate paying cash, here's an idea... how about you get the credit card(s) offered by your favorite gas station(s), and pay them off fully at the end of each month?

That works out pretty well. Every oil company pretty much has it's own bank; I write my checks mostly to "Chevron Credit Bank, N.A." So, unless it costs you a lot to write checks or use Online Bill Pay, using the gas company card is probably the next best thing to paying cash.

They're not really hard to get, even if your credit is so-so; they have a low limit usually, and using one wisely helps improve your credit rating.
posted by zoogleplex at 5:43 PM on June 20, 2005


For a couple of years, I had a money management account with MSDW where my available balance was always over $100,000. Big fucking deal. I don't understand johnson's comment. Either you have the income (or desire to save long enough) to do this or you don't. Although, for the life of me I can't understand why anyone would keep a large balance in their checking account unless it was more than that and they were earning interest on it. All in all, simplistic financial advice like we've seen above is not helpful.

The Europeans mostly use the equivalent of debit cards, but most of them are smart cards that end up being close to virtual cash. That's the way it should be here, and the way it's heading.
posted by Ethereal Bligh at 6:01 PM on June 20, 2005


My comment is, in a nutshell, "are there really that many people who would be adversely affected by a $10 to $50 hold for a maximum of 3 days in their checking accounts?? Really? College educated internet access & PC owning modern world living folks? How do you afford to live?" The balance in the account wasn't to indicate wealth, although to be honest, I'm fabulously wealthy & attractive. It was to state that I wouldn't worry about being cash poor unless the sums being held were in the thousands. Hundreds even might worry me. $10? Who the fuck can't afford a hold on $10? And they're buying gasoline @ $2.50 a gallon? What do you do when it goes up by a nickel in your 15 gallon tanks??? How close to the bone are you people living? That's all I'm saying. The balance in my checking account isn't a money EARNER, EB, it's a money saver (see above re: fees from evil bank). I'd love to have that cash to spend, but if my balance ever drops below $1500, Citibank charges me $10/month, and if it gets below $1000, I believe by some obscure financial agreement I signed on to, they can come take one of my pugs away. Is that what you poor people want? For me to lose one of my beloved pugs???
posted by jonson at 6:23 PM on June 20, 2005


My comment is, in a nutshell, "are there really that many people who would be adversely affected by a $10 to $50 hold for a maximum of 3 days in their checking accounts??

Not snarking here but, I don' think that's the point. It's either your money, or it isn't. While a business might have a legitimate reason to freeze it for three days, that money is not yours during that time. Look at this way: try to tie up one penny of a rich person's money for one day and see what reaction you get. Fees, freezing of funds, paying exorbitant fees to cash your pay check at a "check cashing establishment"--those are techniques inflicted only on people too poor to circumvent them, or people who don't give a damn. It sounds like you don't give a damn. That's your right, but why not get yourself a credit card, use it, hold onto the credit card company's money for 30 days interest fee, enjoy the fraud and theft protection that it offers, and pay off the bill at the end to the month? It makes sense on so many levels.
posted by a_day_late at 6:44 PM on June 20, 2005


The Europeans mostly use the equivalent of debit cards, but most of them are smart cards that end up being close to virtual cash. That's the way it should be here, and the way it's heading.
That is the way it is here, but beware! The cashless world seemed like a great idea until the banks ascertained that we were all addicted, then introduced a raft of fees and charges that saw many (including me) paying $20 or more a month in fees to use the services. This is in addition to the monthly charges for accounts. Consider yourself warned.
posted by dg at 6:56 PM on June 20, 2005


The behavior of merchant card processors (note that a fund hold is placed by the card processor, not some gas pump or your bank) is heavily dictated by MasterCard & Visa. Those guys have a transaction model that goes back to the 70s and is based almost completely on credit-backed accounts along with batch transaction cycles several days long. In such an environment, holds made a certain amount of sense.

Though the backing account on your "debit card" isn't credit, the entire transactional infrastructure of merchant card processors acts like it. This is why Point of Sale (POS, PIN, or so-called "debit instead of credit") transactions don't have these problems. They're using different infrastructure -- POS transactions flow across the interbank ATM authorization systems, a newer and more modern set of networks (and more modern approach to transaction processing) originally put in place to support cash withdrawal from third party ATMs.

While just about every financial institution from Bank of Smallville on up is perfectly capable of receiving, memo posting, and finalizing a "credit card" transaction within seconds, it's important to realize that Visa and MasterCard won't let them. You're not getting screwed by the merchant, some gas pump, the card processor, or even your own bank.

If transaction speed and a lack of fund holding is important to you, use the POS systems and PIN transactions. Yes, you have to disclose more secrets to complete a transaction -- which is a good or bad thing, depending on how much you trust a given POS terminal -- but it's faster. Any bank worth its salt will have the transaction preposted to your account about half a second before the receipt tape starts to ooze out of the POS machine, and "hard posted" to the ledger at the close of business that day.
posted by majick at 12:59 PM on June 21, 2005


jonson writes "man, how poor are you guys? I never have less than $2000 in my checking account or else I get raped for fees by my bank."

Not rich enough to have $2000+ dollars floating around my account in liquid cash.

Dantien writes "a debit card does not indicate credit worthiness."

You know in Canada you can still go to most gas stations and not have to prepay in any way. Pull up, pull out handle, select grade, insert nozzle and start pumping. The gas station will trust you with a tank of gas. It's often struck me as amazing how distrustful American merchants appear to be.
posted by Mitheral at 1:57 PM on June 21, 2005


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