Above is a picture of the receipt I got when I used a gift card to pay for gas at a gas station. By going inside, I was able to charge the exact dollar amount that I wanted to spend.
Why can’t gas station pumps be updated to recognize a gift card transaction versus a debit or credit card purchase? I suppose it could be and we may see that one day in the future. Until then, I simply pay for gas inside and skip the convenience of “pay at the pump” when I’m using a gift card.
Not sure how to use a gas station gift card or a Visa gift card to pay for gas? Here is what you need to know about gift cards and gas stations.
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What You Need to Know About How the Gas Pump Works
Thanks to “pay at the pump” technology, paying for gas with a credit or debit card is easy. You simply swipe the card, enter your PIN number (if needed), select the type of gas you want to buy and then start pumping the gas. Though you’ve probably paid at the pump with a debit or credit card hundreds of times, you may not know that the transaction works differently than your typical card payment. The reason for the difference is that you swipe your card without knowing how much money the gasoline purchase will cost. (Compare this to swiping your card at a store knowing exactly how much you’re spending.)
Because payment at the gas pump works differently than most transactions, gift cards may not work. Here is what you need to know about how payment at the gas pump works:
1. There is a Pre-Authorization Charge
When you swipe your debit or credit card at the pump, the terminal checks to see if your card is valid and if you have enough money (or credit) on your account to complete the purchase–just like it would if you swiped your card at the grocery store. The difference between the two types of transactions, however, is that the grocery store knows exactly how much the total bill will be and places a hold of that amount on your account until the transaction is settled. If your bill is $43.51, for example, the hold (called a “pre-authorization charge”) will also be for $43.51.
At the gas pump, however, the system does not know how much it will cost to fill up your tank, so it makes a guess. A typical pre-authorization charge at a gas pump is about $75. If your gift card has a balance that is less than the pre-authorization charge, the gift card will be declined.
2. Then the Transaction is Settled
When the transaction from the pump is later settled, the temporary hold on your funds is released and replaced with a charge for the actual amount of the fuel purchased.
Although this process happens every time you use a card at the pump, most people don’t even notice it because the charges are settled for the actual purchase amount before they check their bank statements. But gift cards, handled this way, may pose a problem. Even though your gift card may have enough to cover the actual gasoline purchase, the card will be declined if it can’t cover the guestimate made by the machine.
The primary reason that gift cards get declined at gas stations is that banks will not allow gift cards to be overspent; therefore, a pre-authorization charge greater than the balance of the gift card will be denied. Although you may drive up to the pump intending to use $40 of a $50 gas station gift card, the pump will still try to charge the standard pre-authorization amount. If the temporary hold amount is greater than your gift card’s value, the entire transaction will be declined.
Why You Might THINK Your Gift Card Got Over-charged
Suppose, instead, that you drive up to a gas station with a gift card worth $100, but only intend to use $40 towards the purchase of gasoline. As long as the pre-authorization charge is less than $100, the transaction will be approved and you can manually stop the gas pump when it reaches the $40 limit that you set for yourself.
Though, in your calculations, there should be $60 remaining on the gift card, the pre-authorization charge may have temporarily used up more of the balance than you know. If you drive from the gas station to a restaurant and attempt to use the $60 remaining balance before the pre-authorization charge on the card is reconciled, the restaurant transaction may decline. The $60 balance will be restored when the transaction is settled, but you might think the gas station over charged your gift card or that the gift card no longer works in the meantime.
The Best Thing to Do: Pay for Gas Inside (Not at the Pump)
The simple way to avoid wondering whether or not your gift card will work is to go inside and tell the gas station attendant that you are buying gas with a gift card and would like to redeem the gift card for a specific amount. Do you remember when you used to go inside to pay with cash? You’d say, “Please put $40 on Pump #2.” That’s all you have to do here as well. Tell the attendant how much money to take off of the gift card. Though there will still be a pre-authorization charge, it will only be for the amount you specify.
