Thursday, July 30, 2009

Highway Robbery

It's rough being poor! My wife & I live month-to-month and, during the last few days of each month, we rarely have as much as $100 to our name. If a financial emergency arose, we would be in a pickle because we simply wouldn't have the money to cover it. And that potential can be a bit frightening.

Today we unwittingly have found ourselves in a bit of a mini-crisis. We traveled north to Aberdeen to do a little grocery shopping with our dwindling funds. Before leaving to head back south, we stopped at the Safeway gas pump for $10 in fuel. After spending that piddly amount through our credit/debit card, we thought we had left around $60 in our bank account.

However, upon returning home, I used Quicken to get our check register up to date and went online to insure my figuring reconciled with the bank's figures. When I checked our account balance, I was shocked to see NOT a $60 balance but a $17 balance!

Why the discrepancy, you ask? It's seems Safeway deducted $75 from our account to cover $10 in purchased gasoline!!!

This isn't the first time we've encountered this problem. In fact, it seems to be a rather routine business practice these days. We've been encouraged for years to do away with purchases by cash or check and to move to plastic. Now that a significant number of Americans have made the switch, business are changing the rules -- for their benefit, not ours.

I thought I understand this strange practice. I had learned through experience that most gas stations deduct the $75 from one's account when purchasing fuel by pinless debit card. The way around this, I had learned, was to use the debit card like a credit card. This tact has worked at the gas stations around South Bend, but it appears that Safeway does things the other way around.

I don't know about you, but this doesn't seem ethical to me. It's like these businesses are extracting unauthorized loans from us. I buy $10 worth of gas and they take $75 from my account. They use the excess $65 for a day or two and then, when the transaction is finalized, they give the $65 back.

If we were a middle class family with a few hundred dollars in monthly reserves, it might be annoying, but it wouldn't cause a problem. Unfortunately, for families like ours, this unauthorized $65 temporary loan represents about 80% of our available funds. In other words, it creates a B-I-G problem.

If anyone out there can explain to me why this makes good business sense, I'd like to hear it. Please explain to me why a company needs $75 of my money to insure they receive $10 (or $3 as it happened 2 months ago).

I'm all ears.

8 comments:

  1. Very irritating practice and our family is like yours........such things can set in motion a chain of events that can get real expensive if your overdraft your account.

    My wife got paid today. 10.51 left by the end of the day :) We live day to day fine..........it is the unexpected expenses that tend to burn us.

    Bruce

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  2. One of the big advantages to online banking is to keep overdrafts to a minimum. Since with most systems transactions are posted in real time, it makes it that much easier to catch things.

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  3. I think that there are 2 reasons for the push to use plastic. People squander more money on more products easier and in the event of using debit they can accrue a little interest from your money with the extra hold. Cards were never created to benefit people.

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  4. I've never heard of a company doing this. Wow! I'd be beyond pissed!

    It hasn't happened to me yet, but if it does, I will be moving from plastic to cash.

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  5. Not too common here either but it does happen.

    Some internet companies/restaurants will put through a provisional charge to verify your card. There charges are supposed to come right off. With our Health Savings acct with Fifth Third Bank I have seen these charges take a week or more to come back off.

    I know you don't want to use a debit card to rent a car. They often debit the card for 2 times the rental amount. If you don't know that........it is overdraft time.

    Internet banking access has saved us more than once. We see we are overdrawn,make a deposit, everything is OK. In the old days (pre-internet banking) it was 3-4 days before you found out you made a .53 error that bounced 4 checks.

    Bruce

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  6. This happened to me recently before I left on my trip. Because I used a debit card to rent my car, my account was charged an extra $200, until I returned the car. I don't understand the rationale for that, either, although I think it might have something to do with the rental company earning some interest on the money while they hold it for a week. The last university I attended did the same thing with student loan money.

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  7. ugh! i haven't heard this... i am so glad i use only cash. i have a little money in a checking account that, frankly, just sits there. it's about $75 that i had extra one time and just decided that it would be my back up money... so if i ever need it, it's in the bank. however, i cash all my checks and just use the cash! it's a lot simpler. my husband uses checks and cards, but he is dealing with much larger amounts of money as well.

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  8. Mr. Methodic,
    You nailed it!

    Kay,
    It may have happened to you, but you never realized it or maybe it hasn't. Who knows? Maybe it's a regional thing.

    Bruce,
    Yes, thank goodness for the internet!

    Cecil,
    This charge I do understand...sort of. The rental company wants to induce you to return the car. Of course, trading $200 for a newish car might be tempting to some to keep the car. : )

    Iktomi,
    What a luxury to have a $75 cushion. In the old days, before I became disabled, we tended to keep a cushion of several hundred dollars. Unfortunately, those days are long gone!

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