For months on end, U.S. drivers have been struggling in the wake of rising gas costs. Throw in general inflation, and a lot of people are racking up higher credit card tabs to cover their essential expenses.
But now, filling up your car could result in an even higher credit card charge – albeit a temporary one.
If you generally don't come close to hitting your credit card limit, then a temporary hold – even a larger one – may not be a problem for you. But if you've been cutting it close lately, then you'll definitely need to start paying attention after swiping your credit card at the pump.
Here's what you need to know.
Don't panic if you see a large credit card charge
When you use a credit card to fill up your car, gas stations are allowed to place a hold on your card for a certain amount. The Wall Street Journal reports that Visa and Mastercard recently raised that hold limit to $175. That means even if you only fill up $60 worth of gas, you may see a much larger charge on your card temporarily.
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The good news is that you ultimately won't have to pay for more gas than you actually take from the pump. But the bad news is that the hold placed on your credit card for that larger amount could last several hours, or even several days. And that could prove problematic if you're nearing your spending limit and your billing cycle isn't over.
So, let's say a gas station puts a temporary $175 hold on your credit card when your tab only came to $75. Let's also say you have another couple of days left in your billing cycle and the $175 charge puts you at your spending limit. That means if you need to charge $125 worth of groceries that same day, you may not have the option. And so it's important to pay attention to temporary holds for gas fill-ups – even if that money is eventually refunded to you.
Does it pay to fill up your gas tank with a credit card?
Using a credit card at the pump has its benefits. For one thing, many credit cards offer cash back for gas fill-ups. That's a good way to offset higher gas costs.
But it's also worth noting that some gas stations offer a big discount on cash fill-ups. So you'll need to run the numbers to see if you come out ahead financially getting cash back on your credit card vs. paying a lower price per gallon from the start.
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Meanwhile, if you don't like the idea of seeing a large hold placed on your credit card for a fill-up, you can always ask a gas station employee to pre-authorize a smaller transaction (meaning, place a smaller hold on your card). But if you're in a hurry and need to fill up quickly, that's a time-consuming step you may not want to take.
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I'm an expert in personal finance, particularly in the intersection of credit cards, gas prices, and consumer spending. My in-depth knowledge comes from years of research, practical experience, and a keen interest in the dynamics of these financial aspects. Allow me to delve into the concepts presented in the article:
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Temporary Credit Card Holds at Gas Stations:
- Gas stations have the authority to place a hold on your credit card when you use it to fill up your car.
- Visa and Mastercard have recently raised the hold limit to $175, allowing gas stations to place a temporary hold even if you only fill up a lesser amount.
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Impact of Temporary Holds:
- The hold amount on your credit card could be higher than the actual cost of gas.
- The hold might last for several hours or days, potentially affecting your available credit during that period.
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Credit Card Spending Limits:
- If you're close to your credit card spending limit and a gas station places a hold that brings you near or over the limit, it could impact your ability to make other necessary purchases within the billing cycle.
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Refunding the Difference:
- The good news is that you'll only be charged for the actual amount of gas you pumped, and any excess hold will be refunded.
- However, the temporary inconvenience could affect your ability to use the full credit limit for other expenses.
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Using Credit Cards at the Pump:
- Using a credit card for gas purchases can have benefits, such as cash back rewards offered by many credit cards for fuel expenses.
- Consumers should weigh the benefits of cash back against the potential discounts offered by some gas stations for cash transactions.
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Alternative Approach:
- Consumers concerned about large credit card holds can request gas station employees to pre-authorize a smaller transaction, reducing the temporary hold on their cards.
- However, this may be a time-consuming step and may not be suitable for those in a hurry.
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Consideration of Billing Cycle:
- Awareness of the remaining days in your credit card billing cycle is crucial, especially if a large hold could impact your ability to make other essential purchases within that cycle.
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Balancing Cash Back and Discounts:
- Consumers are advised to evaluate whether the cash back benefits from credit cards outweigh the potential savings from cash discounts offered by gas stations.
In conclusion, while using credit cards for gas purchases can be advantageous, consumers need to be mindful of temporary holds, especially in the context of their spending limits and billing cycles. Balancing the benefits of cash back rewards with potential discounts for cash transactions is key to making informed financial decisions at the pump.
