To better educate consumers about debit card holds for fuel purchases, Chevron Corp. is placing decals at its gas pumps nationwide explaining the retailer’s role in the process.
The decals notify consumers that their financial institution may place a hold on account funds in excess of the sale if they use a debit card to buy fuel. “Chevron is not responsible for placing or removing holds,” the decal says.
The National Association for Convenience Stores applauds Chevron’s efforts but also believes financial institutions should play a larger role in educating their customers about the debit hold process.
Nessa Feddis, senior federal counsel for the American Bankers Association, believes it is in the best interest of all parties involved in a fuel purchase to prioritize the consumer. “The last thing the gas stations, [card] networks and banks want is the customer to be inconvenienced,” she tells PaymentsSource.
Signature-debit transactions are at the center of the problem because holds on that payment option can range between $50 and $100 and last up to three days, even if the consumer bought only $10 worth of fuel. Some issuers also charge overdraft fees when cardholders do not have enough funds in their account to cover a hold, says Jeff Lenard, a spokesperson for the convenience store association.
Credit card gas purchases also are subject to holds but are rarely a problem for consumers because they likely have a sufficient credit line available, Lenard says.
Consumers’ misunderstandings about debit holds likely increased when debit card use became more popular, Feddis says.
PIN-debit fuel purchases, which the industry often calls “real-time” transactions, have holds that should last only a few minutes. After gas fill-up is complete, the issuing bank is notified automatically, and the hold amount should change immediately to the amount the customer actually spent, Lenard wrote in a consumer fact sheet for the association.
With PIN-debit, the retailer sets the amount for the hold although it faces risks, Lenard writes. If hold amount is too high it might deny the customer an opportunity to purchase fuel because the amount of the hold must be available in the account.
The retailer also risks not getting paid by the bank if the hold is too low because it is liable for the full amount of the transaction, even a valid one, if it accepts a transaction amount higher than the hold amount. The bank charges the customer but the keeps the funds from the purchase and does not give it to the retailer.
Lenard hopes Chevron’s efforts, combined with the association’s attempts to clarify the issue, will strengthen the relationship retailers and oil companies have with consumers. “The more confusion there is, the easier it is for [a customer] to walk away and say ‘I don’t care, I’m blaming the retailer,’” Lenard says.
Chevron acknowledged the distribution of decals to PaymentsSource but would not provide further details about its efforts.
Oil Express, an industry trade publication, reported that petroleum companies increasingly are fielding calls from angry consumers, who usually start with the local dealer and work their way up the chain of command. Some customers even have resorted to violent threats to show their displeasure with debit holds, the publication reports.
“I even had one woman say that if we didn’t give her money back, she was going to burn down the station,” one retailer told Oil Express.
Pump-technology improvements have made debit holds less of an issue, according to Feddis. Two years ago, many gas stations upgraded payment acceptance at the pump so the settlement was almost instant with signature-debit transactions. “But it’s still an issue at the mom-and-pop gas stations,” she says.
The card networks have encouraged the oil industry to upgrade all pumps, Feddis adds. The technology upgrades at the pump can help enable faster processing of the transaction, resulting in a shorter hold time, she says.
Visa Inc. offers fuel merchants a suite of services that help reduce issues related to holds. Real-Time Clearing is a processing option that reduces the authorization and clearing cycle, “which can significantly reduce hold times that issuers place on cardholder account,” the company says in statement.
The service enables Visa issuers to release all holds within two hours of the authorization request or when the transaction clears, whichever is earlier. Ninety-nine percent of transactions clear within 10 minutes, Visa says.
More than 99% of automated fuel dispenser transactions routed over its PIN-debit network, Interlink, clear within 15 minutes, the company adds.
“Visa is committed to continuing to work with fuel merchants and our financial institution partners to ensure that paying at the pump remains fast, convenient and secure,” the company says in a statement.
MasterCard Worldwide currently is in the process of establishing authorization requirements which will go into effect later this year, according to a company statement provided to PaymentsSource. The requirements will result in the release of holds within two hours.
MasterCard rules currently mandate that all financial institutions release a hold within 24 hours, the statement says. The rule applies to all MasterCard payment cards to ensure consumers are protected from a hold on the funds in their checking accout, the statement says.
Both companies play a role in the hold process because they require that retailers place “preauthorizations” of $1 on signature-debit and credit card purchases. The card issuer places a hold on the account once the transaction is preauthorized.
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