When you pay $50 for gas and charge it to your credit card, you expect to see a $50 charge in your account. Depending on where you pay -- at the pump or inside the store -- you may instead see a charge for only $1. Before going into a panic, or thinking you just got $49 of free gas, understand that this charge is intentional and not the result of a billing error.
Credit Cards Hold
The $1 charge on your card only happens when you choose to pay at the pump. Credit card companies require retailers to institute the $1 hold, as do debit card companies. The charge is a preauthorization that provides a way for your credit card company to verify the card is valid before allowing you to use it.
A $1 charge is often not the only difference you see when paying at the pump. After your credit card company verifies the card via preauthorization, a common next step is placing a hold or a block on your card. Credit card companies place a limit on the dollar amount of gas you can pay for at the pump and instruct retailers to place a hold on your card for this amount to ensure you do not exceed the limit. For example, if you pump $25 in gas, you may see a hold on your card for $50 to $75. This amount remains in place until the credit card company receives and processes the exact amount of the charge.
A Decline May Occur
During the preauthorization stage, if you are already over the limit on your card, or if you previously reported the card lost or stolen, the credit card company declines the purchase. During the hold stage, if you near your credit limit and do not have enough available credit to provide for the hold amount, the credit card company declines the purchase. For example, if you want to pump $20 of gas, have $50 in available credit and your credit card company charges a $75 hold, your credit card company will decline the purchase. Both preauthorization and hold amounts remain in place until your credit card company receives and processes the purchase.
The only way you can avoid a purchase decline by preauthorization or hold is to authorize over-the-limit transactions on your credit card. The federal Credit Card Act states that unless you specifically opt-in to authorizing transactions that exceed your credit limit, your credit card company cannot approve these transactions. If it does, the company cannot charge you an over-the-limit fee.