Banks Cash Big Checks First, Maximizing Overdrafts

USATODAY research indicates banks typically process checks in order of highest balance, maximizing overdraft fees charged to the customer, critics contend.

“There is no excuse to process the transactions this way,” says Jean Ann Fox of the Consumer Federation of America. “The only reason is to charge more fees.”

Banks disagree, saying customers would rather have their electrical bill bounce than their mortgage payment.

One thing is certain: keep an eagle-eye on your balances and payments. Laxness or gaming the float is a sure path to snowballing overdraft fees. — BEN POPKEN

Banks’ check-clearing policies could leave you with overdrafts [USATODAY via Blueprint for Financial Prosperity]

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  1. Magister says:

    This isn’t new, they have been doing this for a VERY long time.

  2. Alex Morse says:

    Yep, They’ve been doing this as long as I’ve been banking. It’s not universal, but it is a very common practice. I actually had one bank NOT do this and was amazed. They had my full loyalty for their good customer service as long as they could, unfortunately it’s a little local bank in my home town so it’s not practical for me to bank with them any longer.

  3. d0x says:

    Heres a good one…

    One week my bank decided to deposit and extra $600 into my account, bank error in my favor woohoo!

    Well I called them up about it and they didnt seem to know what i was talking about. I then drove to the bank with my statement and showed them and they didnt know why or how it happened and they didnt fix it.

    Well 2 months later that extra money was there and accidently I spent $1.42 of it. Well low and behold 3 days later I get a overdraft fee despite the fact that my account still says I have a positive balance of $598.38

    Then my paycheck goes in and again my balance doubles but for some odd reason everytime I buy something either as credit or debit I start getting overdraft fees…I had about 20 of them in about 2 days.

    I went to the bank with them and gave them a WTF speech. Well they then fixed the magic error but removed $200 in overdraft fees from my still positive balance account. I closed my account and moved to another bank where hopefully they dont hire retarded employees.

  4. Morton Fox says:

    Just to be on the safe side, don’t write checks against deposits that haven’t been cleared in your account.

  5. Trae says:

    I’ve had that happen, where I miscalculated a fee (my own fault) but they decided to clear two five dollar checks afterwards (instead of in the opposite order) causing me to overdraft three times instead of once.

    On the upside, when I went into the Associated Bank and argued with them, they dropped it down to one overdraft.

  6. Ass_Cobra says:

    This was the first thing I wrote to the Consumerist about with respect to BofA. BofA gave me the same BS line about not wanting to bounce a mortgage payment. They were absolutely gob-smacked when I pointed out that nothing bounces anyway so how could this be a concern. I did the math for them, they stammered, then they informed me they only process overdrafts as a courtesy and don’t have to do it. So I pointed out it sounded like they were happy to extend the courtesy as long as they could charge as many fees as possible. Silence, stammering, can I help you with anything else, the end.

    Dicks.

  7. SH77 says:

    I had a similar problem with Bank of America. Because of a stupid math error on my part, I overdrew my account by making a debit purchase for less than $5. This was a stupid mistake that was my fault. However, I had also made 3 other debit purchases on previous days that were still listed as “pending” on my account. Although those 3 debits were made on previous days, they were posted to the account (no longer “pending”) the same day as the error debit. Of course they were listed in order of largest to smallest, so instead of just 1 overdraft fee, I was charged 4 fees. I called the bank to explain what happened and not only did they not remove any fees, they were extremely rude. When I later talked to a manager (who seriously told me there was no higher person than him in the company!), I mentioned that I might think about moving to another bank due to this issue and the poor customer service. A couple weeks later I received a letter saying that BofA had attempted to close my account but could not because it was overdrawn at the time. In other words, this man attempted to close my account without my permission. Eventually, all but 1 of the fees was removed from my account after I filed a report with the Better Business Bureau.

  8. clbarrientos says:

    Here is how it works:

    Start of Day your Balance is $10.00

    Throughout the day you purchase @9am $1 soda, 12pm $6 lunch, 4pm $1 candy, 7pm $20 Gas.

    Total Fees 1 overdraft fee. NOT IF YOU READ YOUR DISCLOSURE.

    The bank has the right to debit your account in opposite order for the calendar date! So you will see $20 gas pump first then the other transactions.

    Total fees 4 overdraft fees!

    Now here is the key, the bank will not use this strategy unless its the end of the quarter and its trying to hit a goal!

  9. slowenuff says:

    Us bank does it a little different. Start of the day your balance is $30.00 Then your MVP membership with Hollywood video gets charged $14.99, then you charge not debit a movie $8.00 ,smokes $4.00, and debit $6.25 for fast food.Now you would expect to only have one over draft fee for $3.24….WRONG! The $6.25 gets charged first because its debit charge leaving your balance at $23.75. Now the fun begins Us bank does not run your charges in any kind of sequential order they run them at the same time.So $26.99 minus your $23.75 leaves you negative $3.24 plus one over draft charge. Then you get charged 3 more overdraft fees for the the charges individually.Thats $132.00 in over draft plus your negative balance of $3.24. You started out with $30 bucks you now owe $135.24. This actually did happen to me and when I asked customer service why they replied “Customers requested it to be done this way”

  10. adistius says:

    I discussed this with a friend who works for a bank. She observed that regardless of how this is handled, the bank will have people crying foul. If they process the small charges and bounce the large (thus saving you money on overdraft fees) people will complain that the most important charges (rent, for example) were bounced while their $7.29 latte was paid.

    On the other hand, if they bounce the small charges and pay the large, they get accused of trying to max out fees.

    I’m not sure what’s wrong with me, but I’m left feeling almost sorry for my bank.

  11. kotze03 says:

    To Whom It May Concern:

    My husband and I are account holders at a local bank in Carrollton, Georgia. The name of the bank is Branch Banking and Trust Company (BB&T), which we have been members of for over seven years. I am quite distraught by policies that my bank upholds in charging overdraft fees for insufficient funds. In one weekend (June 21, 2007 – June 26, 2007), we were charged $875.00 in overdraft fees alone on very small purchases that my husband and I made with our debit cards. And even though we made a deposit on Thursday night for $612.00 and another deposit on Tuesday for $2000.00 both of which were automatic transfers the bank still found a way to charge us these fees. Even after the $2000.00 deposit on Tuesday morning, BB&T still managed to charge us for two more debits on our account charging $70.00 in fees for two purchases that we made totaling $24.10 together. The bank has made quite a profit from us I would say especially from people who didn’t even know that they were buying anything. If any person would have known that they were being charged such a fee for such a small purchase how can what BB&T did to our family be called anything but stealing? I cannot even imagine what the bank would have ended up with if we had not begged to borrow money (that we actually have no means of paying back) to put into our account to stop the snowball effect. If there is any question as to why this is possible from responsible people like my husband and me, please continue to read this letter and you will understand.

    Because of the policies that BB&T hold in charging overdraft fees, they were able to steal $875.00 from a family that makes less than $40,000.00 a year. A family who is already struggling to make ends meet as it is. Because of institutions like this in our great country, the common man who is actually trying to legitimately make it finds himself constantly pointed back in the direction from which he started. These bank policies only make it that much easier for poor people to be exploited by those trying to make a profit for nothing. The one advantage that the banks have over the common man is having more wealth and the moral aptitude to steal from poor people. These policies that BB&T hold in order to make their exploitation possible are:

    1. The immediate removal of funds from an account holder in very large sums without proper notification.
    2. The actual fee amount charged for the overdraft is set at an amount that can devastate a person financially. By spending less than $10.00 from an account that is overdrawn with two debits the fees for these two purchases in most cases is about $70.00. For a person who has less than $100.00 in their account to live on for that week this fee is overwhelming. Especially when the purchases were such small amounts because the person does not intend to spend more than what is needed to survive.
    3. The amount of time that it takes the bank to notify a person that their account is overdrawn is insufficient in order to stop the snowball effect of accumulating more and more fees is unacceptable. Because the bank’s automated telephone service is not up to date with the true balance of a person’s account and the overdraft notifications are mailed to the account holder’s home, there is no way of knowing that an account is overdrawn until the fees have added up to several hundred dollars.
    4. Allowing an account holder who is overdrawn in their account to continue to use their debit cards to make purchases allowing for more overdraft fees to accumulate when the purchase should be denied at the time of the purchase. By denying the charge the bank would allow the account holder to actually know that their account is overdrawn and to stop making purchases. I would much rather be embarrassed at a store and not purchase my soda than actually end up paying a fee of $35.00 that would make the soda actually cost $36.00 plus tax.
    5. Charging an overdraft fee for all items presented that day instead of just charging the overdraft fee for the one item that made the account overdrawn.
    6. Not honoring a deposit before debits made on an account if both deposit and debit are presented to the bank on the same day no matter what type of debit is presented.

    To clarify what I am trying to convey, I will give an example from my personal experience with BB&T. This example will clearly show how bank policies for charging overdraft fees are designed to make a great deal of money for the bank from the accounts of people who are living on low incomes:

    If I spend my money from my checking account with several small debits and only the last debit overdraws my account and puts it into the negative, it is the bank’s policy that I will be charged overdraft fees for every debit made on the account that day. For example, if I have $100.00 in my checking account and I wrote ten checks for $10.00 a piece plus I make a purchase with my debit card for $1.25 at the movie rental store and they were all presented to the bank on the same day my bank will charge me fees for 11 items. I will have incurred $385.00 in overdraft fees. The bank takes this money out of my account immediately so I have a balance of – $386.25. What makes it worse is that in my case, as is likely in all cases of people who have ever experienced this complete devastation in their accounts, is that we did not know that accounts are overdrawn. Because we do not know that our account is in the negative due to the bank removing overdraft fees immediately from our accounts, we continue to spend our money that we think is in our account which causes the snowball effect of accruing more overdraft fees.

    Here is an example of how this snowball effect has happened to me. As you will see, it is clear that these fees are very east to accumulate by the average person because of the bank policies used:

    Using the figures given above of – $386.25 as the balance in my account on a Thursday and I know that I will have an automatic deposit from my job on Thursday night of $600.00. If I call my bank’s automated telephone line on Thursday morning to check my balance, I will be told that I still have a balance in the positive because the automated line is not completely up to date. Even if I check my account balance on the internet, I will receive the same results because it is also a little behind as well. I also believe that the bank is supposed to honor deposits before they honor debits. So in my mind, I think that my account balance is a little over $600.00 with the deposit made on Thursday, where in reality the balance is only $213.75 because the bank takes their fees of $385.00 out of my account immediately without immediately notifying me. On Thursday, thinking that I have $600.00 in my account, I pay my electric bill, phone bill, and credit card which add up to $325.00 which puts my account balance back into the negative and the bank charges $105.00 in fees for the three debits. All the while I still believe that that after I pay my bills, I have at least $200.00 in my account.

    On Friday, I buy gas on the way to work and a cup of coffee at the coffee shop in the morning and my husband does the same, both of us using our debit cards. Then both my husband and I buy fast food for lunch with our debit cards. On the way home from work my husband stops at the gas station and buys a snack and a lottery ticket. And on my way home, I stop to buy a gallon of milk. Over the weekend we make similar purchases using our debit cards for amounts totaling less than $5.00 at a time. Just to use figures let’s say that my husband and I made 6 purchases over the weekend that totaled $5.00 a piece making the total that we spent add up to $30.00.

    Now what has happened is that while we thought we had $200.00 in our account and were in the clear to make these small purchases on our account, we were actually being charged $35.00 for each individual purchase we made. Because the purchases that I made on Thursday to pay our bills added up to be more than what I actually had in my account because the bank took such a large amount out of our account without properly notifying us, all three of those debits accrued an overdraft charge of $35.00 a piece. Not to mention all of the other charges that my husband and I made on Friday, which adds six more overdraft charges to our account equaling $315.00 in overdraft fees alone. On Monday morning, my husband and I go to work and make our regular small purchases for coffee and lunch that add up to about $12.00 in total and four more overdraft debits are added to our account charging $210.00 for that $12.00 we spent. When I check the mail after I get home from work, I discover a notification letter from the bank notifying us of the first 11 items that accumulated overdraft fees from Thursday of the week before. When I go to check my account online, my balance is a whopping -$666.25 and this does not include the purchases that we made on Monday. In the end our balance is -$818.25 most of which are overdraft fees made on small purchases using our debit cards. So in reality, the bank was able to take fees of $840.00 out of our account from a mistake that we made on our account of $1.25. This should be illegal.

    These fees would not have accumulated so rapidly if we had been notified on Friday morning of our account status. The simplest way for the bank to notify us is to deny further purchases on our account on Friday morning when we would have tried to purchase our first item. Instead the bank holds the policy to allow overdrawn account holders to continue to make purchases in order to charge even more money in fees. They call it courtesy, I call it manipulation of words and unethical bank practices.

    For most working-class families this type of accumulation of debt is devastating. Most of us are very careful of what we purchase and try really hard not to spend too much in order that we can survive on our small incomes. Most of us would never dream of spending the amount of money that is taken out of our accounts by the bank; we simply could never afford such extravagance. For most Americans, our checking accounts contain all of the money that we have in the world, which is not much in the first place. Our checking account is from where we pay all of our bills, how we purchase food to feed our families, and how we purchase gas to get us back and forth to work every day. With a balance of -$818.25, we simply cannot pay our bills, eat, or get back and forth to work. Because we have no other money in the world or any means of getting more money, the debt that the bank has added to our account will take the money that we had to pay our mortgage as well as our utility payments for the entire month. This puts us behind in our bills for almost an entire month and most of us cannot afford to pay loan payments for a loan in order to put our account back into the positive. We don’t have family to lean on and it is very likely that we could lose our house. In our case, all of our salary deposits are automatically placed into our checking account and it will take two weeks to stop that process, and have our money completely eaten up in fees. So my family has no choice but to starve for at least two weeks.

    Because of this debt, we cannot pay our weekly daycare payment to hold our children so that both my husband and I can work to earn money. I will lose my job because I have nobody that can watch my children for free. When we try to talk to the bank, they sit on their hands and tell us that they are sorry, but there is nothing that they can do because it is their policy after all.

    All of this debt is accrued in one weekend and it can ruin the lives of many working-class families as it has ours. The reality is that we barely make ends meet even when our bank accounts are in tact and in the positive. There is no way that my family could possibly go out and make a purchase of $840.00. We could never be so excessive and for the bank to completely wipe out our bank account and make it so that they will also take out next two paychecks only spells complete devastation in our lives.

    I know that I am not alone in feeling this way. When I type in “Overdraft fees” into a search engine on the internet, thousands of news articles and complaints pop up from all over the country.

    The bank should have no right to take our money out of our account to pay their fees immediately without notifying us immediately. The bank should send us a bill for the overdraft fees instead of removing them from our account immediately. By taking such large sums of money out of our account immediately without notifying us of our account status due to their fees, only causes more items to be charged with an overdraft fee. I am sure that the bank is not oblivious to this fact and yet they are still allowed to do it. If the bank could only see the pain and grief that they cause by doing this, I wonder if they would stop.

    I also believe that charging $35.00 for an overdraft fee is complete robbery. Items that we purchase for under $5.00 should not hold a fee of $35.00 to cover. If this were a loan, like is in reality instead of being called a “fee”, it would be completely illegal to charge so much interest. The really distressing thing is that people that do not have much money make very small purchases of less than $5.00 and from my experience these purchases of less than $5.00 are those that accrue the most fees. If someone could actually look at our checking account they will see that there are a few charges for overdrafts of $35.00 covering purchases we made for less than $2.00.

    I also believe that if eleven items are presented on the same day and only one of those items will make the account overdrawn, then only that one item should hold a charge for the overdraft fee instead of all eleven. It is unfair and should be illegal to charge an overdraft fee for all eleven items instead of just one because there was enough money in the account to cover those ten items.

    The main policy that I believe is the most unfair is allowing account holders to continue to make purchases when their account is overdrawn so that the bank can charge more fees. If we are able to use our debit cards like they are credit cards, then the purchase should be denied when our limit has been reached. For the bank to tell me that they hold this policy as a courtesy is nothing but a way to swindle poor people out of more money. I could understand a person who is having a business dinner being embarrassed if their card is denied, but who uses their checking account for such purchases anyway? If we do not want that “courtesy” then we should have the option to opt out. BB&T tells me that they cannot keep track of who wants to opt out and of those who want it and therefore I have no choice but to keep it. The question that I have is how many people if polled would want this courtesy if they were given a choice? What if they knew the consequences of having every purchase cost them $35.00? I am sure that most people would opt out. This policy is just another way for the bank to manipulate words and people in order to make as much money as they can from unsuspecting victims.

    To add insult to injury, I recently went into my bank (BB&T) to speak to a representative about these excessive overdraft fees on my account and found out that they actually do not honor a deposit before they honor a debt. I thought that with the court case of Bernstein v. Alpha Associates, the banks were obligated to honor a deposit before the debit if they were both presented in the same day. I related this information to the bank representative and she did not know what I was talking about. So, if I find out that my account may be overdrawn and I make a cash deposit into my bank immediately to try to avoid overdraft charges, the bank can honor all of the debits on my account and charge a fee for each of them before they honor my deposit. This is completely unfair and yet another tactic that the bank uses to completely swindle their own customers.

    All of these bank policies are designed to take advantage of people who do not have large amounts of money in their checking accounts. Why else would banks hold these policies other than to make as much money as they can from charging overdraft fees on personal checking accounts? It is not like the bank does not make money elsewhere in more honest ways. These overdraft fee policies are completely dishonest in the ways that they are designed to make a great amount of money from their unsuspecting victims. Why else would a bank take so very long to inform it’s customer that he is overdrawn in his account, continue to allow people to make more purchases on an overdrawn account, and remove large amounts of money from a person’s account without proper notification? Why is it legal for the bank to take money from a customer’s account without notifying them when it is illegal for anyone else to do it? People want to know when and how much is taken out of their accounts on every instance that money is withdrawn from a company. Why does a person’s own bank not extend that same courtesy other than to be deceptive? Why does the bank to remove funds from a person’s account in extremely large amounts to satisfy their fees other than to allow for more fees to accumulate?

    There needs to be policies that protect people from bank policies that are designed to prey on underprivileged families. The bank knows that people need the money that they deposit into their accounts from working very hard all week in order to literally survive. How could they not? Most people cannot work all week and deposit their paycheck into their account just for every single penny of it to be stolen out of their accounts from the bank in order to satisfy their exceedingly overpriced fees. Especially when the account holder doesn’t even know that those fees have actually been charged.

    Something needs to be done about the policies held by these financial institutions in a country that prides itself on fairness for the common man. With policies carried out by these banks, there is no doubt to the question of why the common man can accumulate so much debt and have nothing to show for it. For $840.00, the common man could make a major purchase, completely pay off a loan, pay his bills for the entire month, or even save it in order to become more financially stable. Instead of being able to do any of these things, a person finds himself applying for another loan to cover these bank fees that he could not afford to pay in the first place. Even when a person has committed a crime, the law allows time for a criminal to pay a fine. Why can the law allow for a family who has committed no crime, become penniless from bank fees that are charged and removed from their hands without so much as a piece of paper telling them why. I think for the type of profit that the bank has made from overdraft fees, they can now afford to improve on their deceitful policies.

    How can good people stand for banks to become rich off of the misery of others? There are many ways in which a bank can use their figures, words, and policies to delude and scam a person into losing all of their money. It is a shame that a person can break their back all week doing hard labor to earn a measly $500.00 just so a bank can steal all of it in less than three days without so much as breaking a sweat. The only thing that I am asking is that our money be returned to us. There is no reason why BB&T needs our money. It is with this money that we are able to survive. BB&T does not need our money to survive and surely did not work as hard to earn that money as my husband and I did.

    Thank you,


    Bonney M. Lane-Kotze

  12. savdavid says:

    The banks will never allow this source of revenue to be cut off. They may allow it (because of public outcry) to be renamed, shifted to another way of stealing the cash from their depositors or they will just ignore everyone since they own the Congress with their “donations” to them. Nope, they will not go back to giving service and being happy to make a fair profit on interest for giving out loans. Banks are pigs now.