Wow - I couldn't figure out whether to put this under Who Knew or Wait....WHAT? because this actually blew my mind. I didn't know it and I can't believe it. What's sad is that it is a long standing practice of which I bet most of us are unaware.
I was listening to Clark Howard http://www.clarkhoward.com/, and his caller was explaining how he stopped by a gasoline station, paid at the pump with a credit card, and went merrily on his way. It was simply a coincidence that he decided to check his credit card purchases online that very same day. What he found was a $125 charge the corresponded with the time of his gasoline purchase....but he did NOT purchase $125 in gas! A quick call to the CC Company (in this instance, American Express) and the CSR informed him that this was a "Preauthorization Charge" and it would go away in 8 days or so.
Ok, so this was my first "HUH?" I didn't know that some gasoline stations required pre-authorization for pay-at-the-pump services. Upon further research, I found this information on the Mastercard Website -
"The preauthorization guarantees the gas merchant that the cardholder has the available credit to pay for the fuel that they will pump. The preauthorization amounts are set by the merchant but can be $75 to $100 or more.
While the preauthorization is not a charge made to the account, as long as it is in place, it factors into the calculation of the credit available on that account. For example, if a credit card has a $600 spending limit and an individual has spent $400 on their card, if the gas station processes a $75 preauthorization amount, and then the cardholder purchases $25 worth of gas, the card will have a $100 balance (the difference between $600 and $500) available until the preauthorization is removed (and presuming no other purchases are made)." Click here for the full article: http://www.mastercard.com/ca/personal/en/education/preauthorization/index.html
But this story gets more surprising. Since this caller used a credit card, there really wasn't a detrimental issue. The preauthorization will disappear within a few days, no interest is charged on this amount - basically no harm, no foul. Using a DEBIT CARD is an entirely different story though! If you pay-at-the-pump at a gasoline station you can still be subject to that preauthorization charge. In this same scenario, $125 dollars would be considered "unavailable" for days and could cause you to bounce checks and incur all sorts of insufficient funds penalties that are not legitimate.
It was Clark's opinion that, as inconveniencing as it is, if you have to pay with a debit card you need to go into the store and make your payment.
Sorry to be redundant, but WHO KNEW?
