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Extortion when you pay for gas at the pump

By HOWARD TROXLER
Published September 11, 2005

When I read in the paper that some gas stations and banks were putting holds of up to $75 at a time, lasting up to several days, on people's credit and debit cards for buying gasoline, I thought:

Yes! This is exactly what we need. We need to be hurting people at a time of record-high gas prices and a national crisis that has scattered desperate evacuees across the land.

This news was in Thursday's and Friday's paper, written by St. Petersburg Times personal finance editor Helen Huntley. People buying as little as $10 or $15 worth of gas with a card are getting holds up to $75 placed on their accounts.

Who is doing it? It's a joint effort. Visa and MasterCard set limits of $50 and $75 respectively. The individual bank that issues a credit or debit card decides whether to use holds. The merchant selling the gas decides the precise amount to ask for.

Having a hold means the money is still in your account - but you can't spend it on anything else until the hold is lifted, which can be up to three business days. As Huntley noted, purchases made the Friday before a holiday weekend can result in holds lasting into the following week.

The official explanation for this practice is that it is for everybody's "protection."

When you use a debit card at, say, Publix or CVS, the precise amount of your purchase is known from the get-go.

"Hey," Publix's computer says to the bank's computer, "Troxler here just bought $42.45 worth of groceries. Please take that much money from his checking account and put it in ours."

But at the gas station, when you swipe that card to buy gas, nobody knows how much you are about to spend. You are getting a preapproval just to be able to pump. Later on, the gas station sends the final amount to your bank.

That's the excuse. The merchant is protected by putting a hold on money in your account, in theory big enough to cover what you end up spending.

There are several things wrong with this setup.

First of all, in this day and age, if Publix can tell my bank how much I just spent on asparagus, the gas pump ought to be able to tell my bank how much I just spent on gas. Without tying up my money for days.

Second, there is no skin off the merchant's nose. Depriving somebody of the use of $75 for the privilege of buying $15 worth of gas might be "protection" for the merchant, but it is extortion to customers.

If Hess (to use a chain mentioned in Huntley's article) wants people to plop down extra money on the barrel head to buy its gas, then Hess ought to have to pay INTEREST back to the customer on the difference between the hold amount, and the actual purchase price, for the interim.

How about them apples?

Oh, yeah. Interest. That is the other galling thing about Bank of America and any other other bank that does this. (Some, such as Wachovia, say they don't do it. Better ask your own bank.)

During the time that you can't spend your own money, it has to sit in the bank. And what is happening to it? The bank is using it to make money for itself.

Last and certainly not least, innocent consumers are at risk of bouncing checks because their money is tied up. That means even more hassles and fees.

So, how about these apples? The law ought to say that the bank has to pay interest to YOU on the difference between the hold amount and the purchase amount, and should not be able to bounce checks on the basis of its own hold policy.

I am sure that our Florida Legislature will get right on those suggestions, just as soon as it quits taking campaign money.

And maybe our ever-crusading Attorney General Charlie Crist and state agriculture and consumer chief Charles Bronson can include this in their efforts.

The poorest among us are lucky to scrape up a few dollars to buy gas in cash. The more fortunate among us might not sweat over a brief $75 hold, although even then it's still galling on principle.

But there are plenty of people every single day trying to figure out the best use of the couple of hundred bucks they have. Freezing their grocery money for the benefit of merchants and banks is unconscionable. It needs to be a crime.

[Last modified September 11, 2005, 01:10:06]