If you went to the gas station recently, you probably already noticed that gas stations have raised the credit and debit card holds from $125 to $175. Sounds bad, but what exactly does this mean? Let us catch you up to speed. In this short guide, we will learn how to avoid overdraft at the gas station, what a credit card hold is, how it affects a debit card, and how it affects your funds in general.
First, let us define what a credit card hold is and what the difference is between credit and debit card holds. The industries that use a credit or debit card hold are places like gas stations, hotels, or car services. All offer services with a flexible final purchase amount, which often puts them in a position of risk if the customer does not have sufficient funds for what they purchased.
In order to protect themselves from the risks, they do something called an “authorization hold.” It protects merchants from financial risks and even fraud. An authorization hold is also the banking industry’s way of verifying electronic transactions.
During the hold, the credit card processor of the merchant (in this case, the gas station) takes a certain amount of money from your balance and freezes it until your transaction is settled. Think of it like a deposit made to protect the merchant from stealing. Usually, with gas stations, this hold is lifted within hours.
The difference between credit and debit card holds
When an authorization hold is placed on a credit card, it only affects your available credit line. But when it is placed on a debit card, it reduces your actual bank account balance. However, if you enter a PIN code when you make your purchase, the hold will often be cleared right away, as the transaction amount is immediately deducted from your bank account.
With the alarming rise in gas rates, two of the world’s largest credit card companies (Visa and MasterCard) have authorized gas stations to increase the amount of the hold, putting many at overdraft risk.
There are several ways to avoid it:
1. Make sure you have enough room on your credit line to pay for what you are planning to buy.
2. Carry two cards in case one gets declined.
3. Pay with cash.
These three tips will help you in any transaction you make. The following three tips are specific to gas stations:
1. Ask the cashier for a set amount of gas and pre-pay for it. The purchase will be authorized immediately, and the pump will switch off automatically.
2. Skip the premium gas. Most cars don’t really benefit from it anyway.
3. Use a gas app with a rewards program where you can earn discounts.