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Playing Your Gas Cards Right

Posted on: Monday, 12 June 2006, 21:00 CDT

By Rob Varnon, Connecticut Post, Bridgeport

Jun. 11--Already facing the ire of frustrated motorists complaining about high gasoline prices, gas station owners are also bearing the brunt of customers' anger over debit and credit card holds -- sometimes $75 -- persisting for days after fueling.

"It's not us who are holding the money," said Raj Tala, owner of a Hess station on Barnum Avenue in Stratford. Tala said customers are becoming frustrated by gas prices of $3 or more and that the delay in processing holds is another problem adding fuel to the fire.

Some of the anger may be because not all gas stations post signs warning customers about the holds. Some Hess, Sunoco and Cumberland Farms stations around the state have started to inform customers about the issue.

But there is a bigger problem that goes beyond technological inefficiencies with processing plastic payments. Economists, financial experts and retailers say consumers are having difficulty managing their finances for a variety of reasons and that the problem with holds is a symptom of a bigger issue biting at society: that wages aren't keeping up with expenses.

Tracey Mills, a spokeswoman for the American Bankers Association, said credit associations such as Master Card and American Express limit a hold on an account to three days, but in many cases the hold is cleared earlier than that.

"Most people don't even realize it happened," she said.

But, because the system of electronic payments has evolved over the past several decades, there are times when it takes longer because not everyone uses the same computer system or the latest technology.

To activate a pump, a customer must pay a cashier or slide a credit or debit card into a slot. The computer system running the pump authorizes a purchase of up to $75, depending on the gas station. That $75 is also the hold on the account tied to the card and can take up to three days to clear, despite gas station workers settling for the exact amount by the end of the day when the gas was purchased. Hotels and restaurants also place holds on cards. Attorney General Richard Blumenthal and the state Department of Banking said they have received complaints about the holds. Blumenthal said he is looking into legislation that would require faster processing of holds.

But Tala and other gas station owners said preventing the hold is easy -- all a customer has to do is come in the store and have a cashier ring up the sale inside instead of buying at the pump. Customers may also pay with cash.

Because the holds are temporary, Mills said, they should not generate any penalties for overdrawing accounts, and if they do customers should contact their banks to clear up the problem.

A hold of $75 for three days, most experts say, shouldn't push people over the edge. But if it does, it could be a sign of several financial problems, including a failure to keep records up to date.

"It's very easy for a consumer to overdraw their accounts," Mills said.

People can write checks, make ATM withdrawals and use their debit cards, she said, and banks' computer systems sometimes don't keep up with the transactions. The ATM printout of an account balance might not include a check a customer wrote for a purchase more than a week ago that has not been presented to a bank, Mills said.

"If you're not good at keeping records, you can run into trouble," she said, adding that people who use debit and credit cards tend to spend more money than those who pay with cash. Edward Deak, a Fairfield University professor of economics, agrees the potential effect of a hold shows how desperate some people are in this economy.

"There are a lot of people on the margins," he said. "It's surprising, because we've had an expansion for several years."

However, Deak said, there has been an unequal growth in wealth during the past few years that has left many people scrambling to get by.

Economist Donald Klepper-Smith, of New Haven-based DataCorps Partners, said in 25 years of tracking the economy he has never seen a wider gap between rich and poor.

Heather Greer, a spokeswoman for the credit rating company Experian, said a hold that affects a credit card account doesn't affect a person's credit score -- but that's because the person's score might already be negatively affected by carrying a balance near the limit.

According to an Experian survey of 3 million consumers in April, 14.44 percent of consumers with one or more credit cards are carrying a balance equal to or greater than 90 percent of their limit.

The average credit card limit in the United States is $3,207, but for those close to maxing out their cards, the average limit is $5,175, according to the company.

Greer said people can learn more about controlling spending and debt by visiting Experian's Web site, www.experian.com. Ray Martin Jr., owner of Martin's News & Cigarette Outlet on Barnum Avenue in Stratford, said it's no mystery why some people are having trouble with their finances: it's easy to use plastic. He said even McDonald's, with a menu full of items that cost less than $1, takes credit and debit cards.

Martin said most of his customers use cash because it's quicker and because they're making small purchases. But he knows people who don't carry any cash, using plastic for every purchase.

It is a big change from when Martin's dad opened the store in 1943, he said.

"Years ago, the old-timers were afraid of debt," he said.

Martin said he doesn't understand the choices people are making when it comes to buying things on credit.

"I don't mind paying interest on something that I'm making money on, like property," Martin said. "But paying interest on something with diminishing return doesn't make sense."

He said that includes buying dinners and groceries, because after you eat you don't have anything to show for it.

But Martin said he knows deli owners whose business would be cut in half if they didn't accept credit cards.

For more information on debt management and credit score's, visit www.NationalScoreIndex.com.

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Copyright (c) 2006, Connecticut Post, Bridgeport

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Source: Connecticut Post

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