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Debit Card Pre Authorization and Gas Pre Pay

2008-07-03

Category: politics

There is a new problem coming to America's working poor and middle class people. No, I don't mean the upcoming election. This problem involves gas stations and debit card pre-authorization. Fortunately the solution is relatively simple.

Rising gasoline prices increased the number of drive-offs, the practice of filling one's car with gas and then leaving without paying. To protect themselves from this crime, more gas stations require either pre-payment for the gas or pay-at-the-pump where the customer supplies a credit or debit card before filling up.

This is an issue in the case of debit cards due to the pre-authorization hold placed on the cardholder's bank account. In some cases, the hold freezes as much as seventy dollars in the account and the hold lasts for nearly twenty-four hours. If the cardholder only has about that amount in the bank, the freezing those assets really hurts.

Imagine a working parent unable to buy food for a child because the small amount of money in the bank is held. Think of the pensioner who gets enough gas to drive to the pharmacy only to find out the pharmacy cannot sell them the needed drugs due to a hold on the account. Then there's the plight of the alcoholic who gets gassed up but then cannot purchase the booze needed for the drive home.

The pre-authorization hold is caused by credit card processing services. Many companies use these services to handle the higher security needed to process credit and debit cards. To cut costs at the processing company, they do the initial hold to verify ability to pay at the time of the transaction but do not perform the actual transfer of funds until they run all the related transactions as a batch. This is why the pre-authorization hold stays in place for so long; it stays until the actual batch process.

The solution is to require that these processing companies communicate back to the cardholder's bank to change the value of the hold to the actual transaction amount immediately following the transaction. This does require an extra step on the part of the card processing company, but once the computer programming is done, the actual cost per transaction would be negligible.

Banks prefer debit cards. Handling cash and checks requires the presence of employees who want things like pay and health insurance. Debit cards are processed by computers that normally want to be purchased once but don't whine about cost of living increases. Of course computer maintenance and improvements to software cost money. The maintenance technicians and the materials needed to keep the communications lines are a great expense. These costs still come in far lower than the cost of bunches of money handlers who are prone to errors and theft.

In these more difficult financial times, such little inconveniences become problems. By acting at the earliest sign we can reduce the effect of these problems and maybe even keep them from becoming problems at all. We owe it to working Americans to make these changes. What's more, it is always fun to have our government stand up and annoy the financial industry.


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