This ties right in with Ben's blurb about banks aren't supposed to profit on fees in this post:

http://www.consumerist.com/consumer/credit-cards/senate-he...

Is there no level too low for the Bank of Terrorists to stoop to make another buck?

You know what BOA did to me? I canceled the CC acount with them a year ago. My minimum balances were too much to handle and needless to say, I was pretty much maxed out. They put me on this program that reduces minimum payments but cancels the account and they also do not report it to the credit beauros.

The day I did this they removed my access to the online payment site as well as over the phone service. They told me I have to always go into a branch to pay every month.

Luckily there is a branch near my house, but the real kicker was after exactly a year they stopped sending me statements.

Dosn't this seem like a way to make sure your late on your payments? I know its my fault in the end but it just seems shady.

I've called for new statements but they still havn't started showing up (its been 3 months.)

>> Yep, this is known. You can file write Bank of America a letter informing them they should change this policy, and cc it to your Senator.

Yeah, that'll work.

>> More immediately, if you're continually overdrafting, stop writing checks. Don't spend money you don't have. Don't try to game the float and think ok now I really got make that extra money in two days.

Actually this does work!

PS - Apparently this is standard practice, not just BOA. I used to complain about this to my bank, saying they should process the payment in the order they're received, period.

There's no doubt in my mind some evil f**k comae up with this idea consciously and specifically knowing people with low incomes living paycheck to paycheck who play the debit juggle game were going to at some point get slapped.

There are few things more annoying in the world of personal finance than to see a $1,000 transaction you made yesterday get processed first so that the $4 debit to Seven Eleven you made a week ago bounces, costing your $25. (I mention 7-11 because last I checked they were notorious for letting your debits languish in limbo for over a week before they register to your account.)

Boy, I'm lucky with my credit union. They state flat out that they process all deposits FIRST, then any debits to the account. And if you've given them permission, they transfer (fee-free) from your savings into your share draft account if it looks like you're going to be overdrawn.

Heck, I've even had them call me to inquire about a missing regular direct deposit (payroll), even though I wasn't in danger of being overdrawn.

This actually just happened to me with Citizen's Bank. A week ago on Monday (the 26th,) I bought a protein bar and this Tuesday morning (the 6th,) my bills auto-deducted from my account. So, on that Tuesday I was charged for the utilities, which bounced, and then again for the protein bar I bought a week before, causing another bounce! I went down to the branch and got them to swap the order of the transactions so that they were in the "right" order, but they said they wouldn't do it again. I was pissed off. $70 in overdraft fees is a fortune when you're in college, eating ramen-fucking-noodles.

While I agree that items should be processed in the order they were received, this doesn't do away with the fact that you were playing the waiting game and hoping you could get money into your account before items were processed. Well, I got news for you (and anyone else reading this), Check 21 (legislation allowing banks to process your checks electronically instead of having to actually ship the physical check to a processing center) has pretty much eliminated this game. Don't write checks your @ss can't cash.

@mfergel: Nice thought...but when 7-11 can take over a week to charge things, sometimes you forget that $2 coffee you bought the week before. Sometimes idiot cashiers double charge you (this has happened to me), and you play tight enough that that bounces five other things (that if done in correct order would only have bounced one thing).

That being said, this is common banking policy...largest first, because "they find the largest charge is usually the most important, and the one that shouldn't bounce"...even though they still put the rest through.

Ben, you should really change that to "all banks", because calling out Bank of America on something that the entire industry does (albeit wrongly) isn't entirely fair. Calling out the industry is awesome.

Yes, I would agree that most all banks do this; its usually in the terms of agreement you receive when you opened you account. The problem being that most people don't read those until something happens and then they cry foul.

Does anyone keep a ledger anymore or do we all rely on what the receipt at the ATM or online amount? BOA does have these great little ledgers that are about the size of a credit card. If you have problems with overdrafts, I would keep one.

This just in: The sky is blue!

I don't really disagree with this practice. In my case (and this happened... well... yesterday to be exact). BOA immediately processed my rent. The only other large charges I've ever have are things such as car insurance, student loan, etc. ATM withdrawals have float time, but I think this is due to the fact that a lot of ATMs don't process the withdrawals quickly anyway.

When you look at it, would you rather pay $35 overdraft fee, or pay the $20 penalty fee to your management company, and become a "bad tenant."

I spent a lot of cash on NYE, way too much, and put my budget out of wack for about two months. How did I save myself? After calling BOA looking for help, which they weren't much, I applied for the Capital One Platinum card, which has 0% interest until August. I have mediocre credit, so I didn't expect to get the card. However, I said I wanted to do a balance transfer (I think this affected the credit limit to be higher); and got the card with a large credit limit. This may help you out of a cash hole. I did transfer my balances and used up 90% of the card's available balance, but at least I'm not waking up in cold sweats at night thinking I'll be out on the street in three weeks.
Also, you can make a quick budget spreadsheet and cry at how much you spend on cigarettes, then read Andrew Carr's "Easy Way To Stop Smoking," and save $2555 a year (NYC price).

This is just a general statement, while I agree with the concept of paying larger items over smaller can be a screwy deal, I had recently read the "Account agreements" in detail at my bank (which you may want to verify if this is in your bank as well), they have the full right to return ANY item if you do not have sufficent funds to cover it when it is presented.
So While we could go on and on about paying larger items first to maximize OD fees, you have to think of it the other way, if they start returning items instead of paying them, which would you rather have them return? The Check for your Rent or your utilities (which could get you kicked out of your house or get your utilites shut off) or the one for your run to the store for chips and soda?
Yea, either way you could be charged a returned check fee, but which would you rather be stuck out on the street (or be forced to issue offical checks/money orders for rent) or be stuck and not being able to write a check at kmart anymore? On top of the fact that the rent/utilites being late you very likely could get the returned check fee AND a late fee as well.

Just something to keep in mind before accusing your bank of something they haven't told you.

You then have 3 choices:
1) Find another bank that doesn't pay items this way (but also make sure they still PAY the items even if presented in reverse).
2) Find out if you bank offers some kind of Overdraft protection from savings and throw in $5-$10 a week to protect yourself and save anyway.
3) Balance your checkbook so that you are able to avoid writing a check on funds that are not available.

Just a note: even if you don't take the advice about depending on checks to float, you may want to just make sure you have the funds before writing a check, more banks and companies are processing items electronically, which means float time drops to NIL. (both Check21 and ACH transactions could mean next time you write a check at WALMART, it's taken directly from your account, no wait time).

Simple fact: save your receipts and keep a record of your purchases (you all have computers so get Quicken or MS Money or just use a pad and pencil), enter them each night -- it takes 2 minutes -- so that you know exactly how much money you have on hand and this will never happen to you.

If accidentally being "double-charged" (which has never happened to me and I find it hard to believe it happens with any regularity) for a $2 coffee puts you in danger of an overdraft, you need to close your bank account and deal only in cash and money orders. Seriously. What is the point of a bank account if the balance is continuously near zero?

If you have a counter-argument to this then I believe you need to look in the mirror. If you live that close to not having the money then stop spending it. Forgo the $2 coffee ($2 for coffee how sane is that? Buy a bag for $7 and get 20 cups of coffee).

Stop going out and start staying in and learn how to manage your money. You can make the claims you want to make but if your claim boils down to (I don't make enough money to cover my lifestyle, then you either make more money or change your lifestyle). Whining about a banks order of charges is pointless.

I work for one of the banks mentioned above. As an employee, I hate that items post from highest to lowest because I hear about this constantly. And what I'm not allowed to say to customers, but I can say here is that banks have been doing it and will continue to do it until someone gets Congress to put a Federal Regulation on it.

And, unfortunately, there is little you can do about it. Ultimately, it was either your fault for not recording the transaction into your ledger or the company's fault for processing a charge fraudulently.

I know for a fact Chase does this and from what I've heard so does Citi.

It ain't a unique BOA thing. It's shady as hell, but in the end it's usually the fault of the person not the bank. If you look at it another way, they're doing you a favor by not bouncing a check. I'd rather pay a fee at a bank than not have a check accepted for my rent (as an example; my building won't take a check from you after you bounce a check).

It'd be great to treat checks like money already spent if banks would start treating deposits like money gained instead of a curiousity that needs to be studied for a week so that they can maximize the possibility of overdraft charges.

Fortunately I am with a credit union and the one time this happened to me (I'd used my ATM/DEBIT card for deposit on a car rental) they fixed it when I complained and explained to them that they processed my debts and deposits(the refund from the deposit) within minutes of each other and that I didn't think that was very member friendly.

I've always found it morally criminal that a debit to my credit card processes in SECONDS and a refund processes in DAYS while every cheap whoring bank along the way makes interest off my money.

I used to bank with BoA until I moved to England last year and honestly found them to be pretty helpful (for a bank). I realized their processing order a couple of years ago and confirmed it with a friend who used to work for them.

I also used to be lousy at money management, so I have to agree with dmc there, use Money or Quicken, it's cheaper than an NSF fee.

Two years ago I bought MS Money and I never went overdrawn again.

What difference does it make?? ANY order you put these debits in, the ending balance is still $39.31. If you're coming so close to broke, STOP SPENDING.

I've had plenty of problems with BOA over the past few years, some were mine (I have dyslexia with numbers so I screw up from time to time) but others were theirs. Sometimes transactions wouldn't show up online, their comment was 'use your ledger.' Fair enough, sometimes they would screw up and not process a direct deposit and things would bounce, their response; "don't always depend on direct deposits to happen, you should have enough in your account regardless," annoying (and only happened twice over 3 years, both times their fault) but, ok whatever. The best part though, is when I got my final check from my last job. It came from another Bank of America (I worked for a fortune 150 company) and was payroll and they STILL held it 10 days. Their response, 'our out of state banks are not connected like that.' Include that with their lousy customer service (direct comment; "In the state of Florida, we are not responsible for possible banking mistakes" in response to them accidentally debiting over 8k from an account that had less than 1k in it causing bounces, when I was trying to get them to reverse the addt'l 300 in fees). Finally I decided I was over it and moved to a local credit union and never had an issue since.

Every issue they had that was their fault while I was their customer, they fixed. It took a while and a bit of fighting as well as some legal threats (I actually hired a lawyer for the 8k banking error) but everything eventually did get taken care of.

Its always a good idea to make sure you have enough to cover what you spend, you can really no longer 'float' checks but sometimes even being vigilant, BOA can still catch you by surprise.

Don't try to game the float and think ok now I really got make that extra money in two days.

Its also illegal. Writing a check when the funds aren't available is considered fraud (there may be another term...misrepresentation or something). At least in Maryland.

Scuba Steve has a point:

This post lag thing causes a lot of headaches. And it's annoying to see a paycheck post to your account without actually "counting" as your balance and then see charge go through and put your "real" balance below zero even as you have a "pending" deposit sitting there. Also: If you deposit a check on the same day you make a debit, they ALWAYS put the debit first even if the debit was made after the deposit was made (and both went through the clearing process in equal time). I don't think that's right to say that on any given day NO MATTER WHAT you're debits will be posted first.

Also, isn't it becoming kind of a platitude for the sanctimonious people to defense enormous financial institutions that often engage in scuzzy behaviors? OK, so I learned fiscal responsibility through years of trial and error and you learned it instantly. Good for you. I seem to recall that the average (AVERAGE) American owes $7,000 in unsecured debt. So if you're one of those exceptional people, good for you. Do you want a cookie?

@medium_sized: Say you have $431 in your bank account, and you make three transactions. The first is for $1 for a candy bar you bought at the store. The second is $50 for your gas bill. The third is $400 for your rent.

If they process the transactions in chronological order, the $1 and the $50 clear, and the $400 overdraws your account. You pay one $30 overdraft fee, and your ending balance is -$50.

If they process the transactions in order from biggest to smallest (which they do), your rent check clears, the $50 transaction bounces, and then the candy bar bounces you again. You pay two overdrafts fees of $30 each, and your ending balance is -$80.

This is especially annoying if, for example, you bought the candy bar 10 days earlier and 7-11 just never turned the transaction over to your bank. You had the money when you bought the candy bar, so your transaction should have cleared. But because 7-11 didn't clear it, and because the bank chose to process the $1 transaction last, you're now paying overdraft fees on transactions you made when you had the money to make them.

Wachovia does this too. They say it's to ensure that your biggest charges clear, so your rent doesn't go unpaid. The fact that they clear the money and then charge you for overdraft makes this argument ridiculous, but they're not interested in changing the policy.

Also, every bank I'm aware of processes deposits before debits. I seem to remember a lawsuit about 10 years ago to keep banks from processing the debits first... I know Wachovia does deposits first, and I'm pretty sure BoA does too.

>> Its also illegal. Writing a check when the funds aren't available is considered fraud (there may be another term...misrepresentation or something). At least in Maryland.

Wrong. It's illegal to write a check when you know it won't be honored by your bank because of insufficient funds. The overdraft protection that banks offer means the check is good, even if it ODs your account. Saying this is illegal is like saying it's illegal to make a charge on your credit card when you don't have the cash. That's not illegal. It might no be prudent, but it's not illegal so don't accuse people who do this of breaking the law because they are not breaking the law. The law you are referring to is a law written before bank a started issuing unsecured loans tied to checking accounts. (That's all OD protection is. It's no "protection" but rather the bank simply taking on the role of unsecured creditor to its checking account holders. There's nothing illegal about writing a check or doing a debit that you know the bank will honor.

I really don't understand why people are complaining about what order the bank processes your checks when it's all about how much money you have in there. $39.31 is still $39.31. If you are dependent in how things trickle in, then I suggest doing a budget and balancing your checkbook weekly.

Frankly, if you're on this site, you're an intelligent person with access to a computer. If you're not making enough money to cover your expenses, then you really need to check what's going on and your circumstances and make any adjustments you can.

BOA is not the only one. Regions Bank also now porcesses large transactions first. They say this is to "make sure your important bills pare paid first" (house, car). of course, it is the same reasons BOA does it, to maximize NSF fees.

I recently worked for Regions, and have left because of the merger, and in part to the new draconian fee structure and bank policies they are forcing on customers.

@Echodork:

431-1=430
430-50=380
380-400=-20

431-400=31
31-1=30
30-50=-20

no matter what, THERE'S NOT ENOUGH MONEY.

Also, just because your account APPEARS to have money in it before a check clears, it doesn't mean that money is expendable. Write it down, keep track of it, and you'll never end up in the red... no matter WHAT order the bank itemizes the debits.

Drew writes:

"Yes, you've been over this issue before. BofA has said that they process larger amounts first because those are typically the most important: mortgage, car, etc. The thing is, that ain't bull. Just last night went a little crazy on billpay, then remembered I had a rent check floating around out there. Guess what order my bills will process in?

Rent.
Car payment.
Oops, the rest.

In this case I borrowed some money to cover the whoops factor, but tha's a real-world example of BofA's policy working for the customer."

Thank you, ben!

I've got Intrust Bank -- and they do the same thing. Highest debit comes first every time.

Was it necessary to charge something that was 12 cents? What happens if that was the item that caused you to overdraft. A stick of gum really worth $35.12?

@olegna: If there's overdraft protection, that is different, but I didn't see that in the post.

Do people need any more reason to completely stop doing business with BOA? First they start giving credit cards to any José Schmosé WITHOUT a SS# and now they try to cheat people make a mistake and accidentally write a check without having the funds. Or, what if their direct deposit didn't go through as it should have? Is that their fault?

This is why I use financial software to always make sure I have the money in my account for all of my scheduled transactions and checks on the day that I intend to pay them. Just this past month I started to freak out because it looked like I wasn't going to have enough money to pay my rent on the first (even though I know it takes a few days for them to cash the check), then I remembered to enter that I was going to get paid on the first and I calmed down.

Who uses checks anymore? I pay everything, even my rent, directly through my bank's (Citizen's) website. Even if I owe my roommate money, I'll have the bank send him a check instead of writing one myself. Align that with direct deposit and you get rid of a lot of those pesky problems.

Thanks for posting my email, Ben.

I also thoroughly agree with other commentors: if you don't have the money, you don't have the money. If you had the $1 for the candy bar two days ago, but 7-11 didn't process it until this week, what difference does that make? You wrote down in your register that you paid $1 for a candy bar last week at 7-11 right?

The bottom line is that no matter what the bank's policy is, it's your damn fault for overdrawing your account. Yes, their "large things first" policy could result in more fees, but that's just the row you have to hoe.

For my part, I'm making it standard practice when doing online BillPay to make the payment date the same as the due date, so if I realize I forgot a check I have time to cancel the bill payment transaction, so my particular issue won't happen again.

I have to say I have mixed feelings on the whole issue of credit cards and debt. On the one hand, I keep thinking of the old Saturday Night Live skit about "The only debt management system you'll ever need. If you can't afford it, don't buy it!"

But at the same time I know some people who are in debt due to events and occurrences completely beyond their control. For those people, I think the credit card companies and banks need to be kept in line somehow.

Yes, yes, yes, of course you shouldn't write checks that your @$$ can't cash, and thanks to my current financial circumstances, I don't even have to consider that option again. But, at one time, I did depend on the float for a very-short-term interest-free loan of sorts, and it wasn't so that I could get a venti latte at Fourbucks (I hadn't even heard of a latte then), it was for exactly enough generic tuna and mac&cheese to last me until the next payday. So I won't judge those who don't have a nice comfy cushion in their checking account.

And Scuba Steve has it exactly, precisely right. Anyone who thinks that banks don't game the system as assiduously as the most incorrigible check-kiter, or that they wouldn't miss all of those overdraft fees, isn't paying attention. There is no real reason why banks can't credit my account for deposited checks immediately if they can debit them immediately with that little check scanner-thing that more businesses are using. Once someone comes up with a more reliable and secure way of direct transfers from account to account than PayPal and its ilk, a lot of these banks are really going to see the hit in their bottom line.

Ok, if it takes 7-11 a week to process a transaction, you CANNOT use the "Well I HAD the money excuse." Part of owning a bank account is knowing how much you have in it. Grab a small note pad and a pencil and do some math. When you spend money from the account you MINUS that amount from your balance...then you know how much you really have left in your account.
It's funny how when we don't manage our money we blame big business for not babysitting us. I am all for consumer rights, but this is one time when it's the consumer's mistake. It's simple math, we all learned it in Elementary School.

>> If there's overdraft protection, that is different, but I didn't see that in the post.

If your bank is charging you $25 for over-drafting (rather than sending your debits or checks back to whomever you made the purchase) then by definition you have OD protection.

Again, if you write a check knowing your creditor will cover it, it's not illegal. It's only illegal to write "hot checks" knowing they will not be honored by your bank.

PS - I still write checks on occasion. For example, if I owe somebody money and I need to mail it them -- a check is a very easy way to do so. Not every human being you might write a check to has a PayPal account.

PPS -- Universal Savings Bank Upfront Rewards credit card doesn't have an electronic payment option, believe it or not. (It's one of my cards. I keep it because it has a very low APR, unlike Citicards or CapOne.) There are probably a few other companies that are fully electronic, so, yes, checks are still being written in this world.

Also: one other thing: bank-to-bank transfers. Why in the hell in this day and age do banks have to pre-post transfers to each other? For example, if I get a check for a freelance gig and that check is drawn from a major international bank (like, say, Citi) and I deposit it into my account, then why in the hell does it sometimes take 48 hours for that transfer to clear?? Meanwhile if I buy a pair of sneakers at the Foot Locker, it posts immediately and hits me with a OD fee while my bank is holding my Citi check in some kind of pre-post escrow limbo? That's just more bullshit designed to squeeze fees out of consumers, IMO. There's no reason why in this day and age Major Bank No. 1 can't confirm electronically and in a matter of minutes from Major Bank No. 2 that a check is going to clear.

And why in the hell are there consumers on this board DEFENDING major international financial institutions that do stuff like this? Helllooo! Wake up people!

Aeroracere: My rent check is the only one that I write regularly, because I don't have the DD option, and it is starting to seem like some irritating Victorian custom that should be disposed with entirely.

Shutterman: A friend of mine called it the Don't Buy Shit school of personal finance, and meant it in the sense of both "don't buy jack shit", and "don't buy things that are crappy or likely to go out of fashion quickly". But, of course, for many people there really is no such thing as discretionary spending.

Thank you for this. It's good to see all of the frustration I had over this being validated.

I had B of A for over 15 years and left over it. I wish I had done it sooner.

Part of the reason why they do this is because they view the higher valued checks as more important and so they want those to go in, even though the whole overdraft fee thing is still a joke, that does make a little bit of sense.

pf - If that were really the case they'd also DEPOSIT the highest value transactions, too. They do not do this, therefore that reasoning is not consistent with their actions.

In fact, my bank purposefully put in the debits first. So not only do they do highest transactions first, but they also do the debits before they do the credits.

So a $3.50 latte will go through before your $1,200 paycheck if clear on the same day, even if your paycheck was literally deposited a day earlier than the $3.50 latte purchase. (So the paycheck takes 24 hours, but the latte goes through instantly and if the paycheck clears on the day you buy the latte, and your pre-paycheck balance can't cover the latte, then you're slapped.)

I agree totally with bad spending habits and the stupidity of buying a $3.50 latte if you're living paycheck-to-paycheck, but that doesn't excuse predatory banking schemes that are specifically engineered to exploit the stupidity of the poor. Not when these financial groups are swimming in cash (with higher profit margins than any small business could ever dream of) and specifically targeting the plebs with lawyer-ly and confusing contracts.

I mean, just because a high-school dropout is easy to take advantage of doesn't mean it's the god-given right of the "free" market to dole out $8,000 credit limits to people who earn $12,00 a year and then nickel-and-dimeing the shit out of them with their bank accounts -- often by the very same corporation that gave out the credit card; there was a time when that was would have been illegal, but thanks to "deregulating the invisible guiding hand of the free market" your bank can now give you a credit card and charge you 32% (or whatever the hell it feels like, because your entire contract with them is made null by the qualifier that basically says "you signed a contract with us, but we can change the terms any time we feel like it and for whatever reasons and there's nothing you can do about it".)

PS - A little sobering information for you. I have friends in Mexico who, during the mid-90s financial crisis in Mexico saw their credit card APRs reach 100%.

Yeah, 100%. In fact some credit cards went over 100%. This isn't likely to happen in the US, but there absolutely nothing in place that could stop it. If there's ever a major financial crisis in the US (like, say, if China decided we were getting uppity and decides to dump its T-Bills on the world market and OPEC decided to use the euro as the benchmark currency for oil)t the people with unsecured debt will become instant paupers and debt defaulters. (But unlike in Mexico, they won't be used to the characteristics of real poverty, and everyone would become a socialist overnight.)

I have worked at a couple of local banks. Both banks did this. This is a very common practice that most banks do.

One of the reasons they do it (other than making more in fees) is what would you rather have bounce your mortgage or car loan payment or your $5 check to Starbucks? They follow the logic that the higher $$$ check must be more important.

I really don't see what the problem is here. First of all if you're living pay check to pay check then maybe you shouldn't be spending money that you don't have. If you can't keep track of what you've spent or how much you have in your account, then keep the ledger in your checkbook or use Quicken on your PC. It's really not that hard. Second, I don't understand the problem with this guy's account. The screen shot of his account shows the numbers in order from smallest to largest but they were all posted on the same day. How does he know if they were deducted from the account in that order? I have BofA and they don't do the alleged to me, and they even post my credits before my debits.

Once again I really don't underdstand the problem here.

I contracted at B of A for a little while and the 'marketing dept' did a presentation to IT about how they maximize profits (aka screw their customers every chance they can get). Looking around the room, most all of the IT staff were appalled.

B of A doesn't like taking the heat in the press, so they wait for other more daring banks to implement the more cut throat policies, then B of A follows suit.

I try to avoid banks entirely. Credit Unions all the way for me.

Here's a free tip, folks. Live within your means. Don't stay so close to the financial edge. Don't rack up credit card debt or spend so much on living that you risk overdraft. Really, with all the demands on my sympathy, I'm damned if I'll waste it on those unable to manage their finances sensibly.