Apparently, 5/3 Debit Cards Are Instant Magic Money Wands

In followup to our post on how 5/3 Bank racks up overdraft fees by treating pending charges like they’re processed, we asked customer service, “What’s the rationale for counting pending debits against the ledger balance? Isn’t that contrary to the definition of pending, and how banks traditionally handle transactions?”

They replied:

Thank you for using Fifth Third Internet Banking. In response to your inquiry, you cannot use your debit card unless there are actual funds in your account to cover the transactions.

Ouch. There you have it folks, don’t be confused by funny words like “pending” or “ledger balance,” treat your 5/3 Bank debit card like a magic money wand that insta-swoops cash from your account. You’ll never game the float in this town again. — BEN POPKEN

PREVIOUSLY: 5/3 Bank’s New Overdraft Fee Stream: Treat Pending Charges Like Processed!

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  1. jackdangers says:

    I can see this not normally being a problem unless you decide to, say, rent a car. Will an authorization on your card for much higher than the actual rental rate (which isn’t technically charged until you return the car) count as a fully fledged transaction (even though it isn’t)? I know that with Chase, even though a transaction might be listed as “Pending” on your account, it counts against your available funds immediately.

    Guess its time for an article on credit unions in the NYC area.

  2. Raanne says:

    A debit card is like a check card, right? Isn’t it illegal to write a check *knowing* that you don’t have the funds to cover it? So wouldn’t that apply to debit cards also?

  3. Buran says:

    They’re building a 5/3 bank down the street from me. When we have 5 more banks on the same street. When the post office was torn down to be replaced with A BANK. We don’t need another bank. We have no post office in this city, however. We need A POST OFFICE. And yet, we’re building more banks!?!

    I think it’s time to write to the mayor …

    Oh, and 5/3 sucks.

  4. jackdangers says:

    @Raanne: For me, the real problems arise because of the awesome defects in the whole credit/debit transaction processing system. I have had “Pending” charges on my account for 2 weeks at a time that have happened because of a signal timeout or somesuch failure on the merchant’s terminal. While authorizations that are not completed have an automatic release date of around a week, it still sucks to be out $76 for a week or more (as happened to me recently when the MetroCard dispenser crapped out on me). When you write a check, then for some reason don’t use it, you don’t have to worry about a “Pending” transaction on it.

  5. Very simple: Never bank with improper fractions!

    Fifth third sucks. I had to fight with them for a week just to get them to close an account.

  6. OnceWasCool says:

    Off the subject, but where does Consumerist find all these neat photos?

  7. Zonino says:

    I am a member of a credit union and they also take away pending transactions from my current balance. The difference is that they have a policy that removes a pending transaction after 5 days. Also, if you suffer an Overdraft or NSF fee because of the pending transaction, the fees are automatically reversed once the pending transaction is removed. (Of course, if I know that there is going to be a pending transation for something like a car rental, I usually use a credit card that I rarely use..)

  8. wobudong says:

    Debit cards are not user-friendly. I bank at Chase, which insists on sending me debit cards for use with ATMs. I keep on tearing them up and insisting on a card that only is good for ATM use.
    Debit cards, if stolen and used rapidly — always the case — can deplete your account. Once you realize your debit card is missing and notify the bank, you’ll be OK. It’s that time between loss and alerting the bank than could make a big difference to you.

  9. xkaluv says:

    Their reply just reinforces how poor the front line customer service staff is for most of the companies today. The answers you get from the people who answer the phone or reply from general mail boxes is simply non-answers. They are designed to make you just confused enough to not ask any more questions in the fear that you will actually get dummer.

  10. shashashocking says:

    @Raanne: maybe if you ARE using the card as debit. But as credit it changes the way the transactions are processed. For me, at 5/3 debit charges are POSTED and WITHDRAWN instantly. Credit charges are PENDING for almost exactly 3 days(as in they clear on the 3rd day) before the charges are completely posted. Hence the reason people feel that if the transaction hasn’t POSTED the funds aren’t withdrawn.

    @jackdangers: I spoke with a rep about the hotel/car pending charges earlier and she said that those specifically will not count against you. So, if I had 20 dollars, and had a 100 dollar hotel hold, according to her, I should not be overdrawn.

    In my specific situation today, I had 14.50 after every transaction from the weekend POSTED, but had about 90 dollars in PENDING charges. I figured that if those were pending, and I got my paycheck in today(Which always clears the next day), then I should be fine, because the paycheck and the charges POST the same day. Apparently I was wrong, and am now going to get 99 dollars in overdraft fee’s for PENDING transactions.

  11. Slipgrid_ says:

    Well, on the “5/3 Debit Cards Are Instant Magic Money Wands,” you can take out money even if you are over drawn. They just charge it against you, and charge overdraft fees.

    The place I think they could into trouble is, if one signs-up for free trial online that require a credit/debit card, but won’t charge you if you cancel within X number of days. They still put a pending charge on your credit/debit account for a dollar, and that could cause someone to overdraft even though there will be no charge in the end. That is wrong.

    Anyway, 5th 3ed, suck as they do, is most likely the best bank in Ohio.

  12. aiken says:

    @Raanne: No, a debit card is not like a check, other than that it draws from your checking account. In particular, the merchant doesn’t see the money right away — they see it when the transaction closes, not when the pending transaction is submitted. So what’s happening here is that 5/3 is essentially taking they money out of your account when the pending charge is processed, and sitting on it (and earning the interest) until the transaction closes, which can be as long as 3 business days (though it’s usually shorter these days), and then paying the merchant.

    For a check analogy, it would be like if your bank required you to call them when you wrote each check so they could deduct the money (and sit on it, and earn interest themselves) while waiting for it to clear.

    It’s a fairly abusive practice, and I can’t imagine why anyone would bank with a company that does that.

    I speak from experience: I had a bad experience as a student when I overdrafted my Wells Fargo account with one check. Due to a software glitch or something, they charged me multiple overdraft fees (each one caused because there wasn’t enough money in the account to cover the previous one). One night, $280 in fees, which they refused to fix. I paid it off over a month or so (being a starving student) and switched to Citibank. Today I’m well established and Citibank has seen many hundreds of thousands of dollars in business that Wells Fargo would have gotten if they had treated me right.

    Point being: vote with your wallet. There’s no reason to let a bank smack you around with abusive policies designed to maximize their fees.

  13. Charybdis says:

    Relying on float time is illegal. If you don’t have the funds available when you make the transaction then you’re in the wrong. It’s been a perk for years, but with changes in policy and new technologies coming onto the scene (Check 21 anyone?) those wonderful days of yore are over.

    Having said that, pending transactions *do* suck because of the way they’re handled. Restaurants routinely calculate a tip onto a bill for preapproval, and that doesn’t drop off immediately. Also, when a transaction is stopped before posting the pending transaction will still affect your balance until it drops off at night, which might not be until Monday’s processing, tying up funds all weekend.

    And let’s not forget the dreaded ‘multiple pendings’ for one transaction. I had two $160 transactions pending on my account for an ATM that was out of cash. They dropped off last night, but I’d have been screwed if I hadn’t had enough money over that to allow me to withdraw from another ATM.

    Yeah I work at a bank, can you tell?

  14. Smoking Pope says:

    @Raanne: Banks kind of encourage you to write a check on non-existent funds when you use online bill pay. Most people set up a payment (which goes out in the form of a check) and schedule it for their next payday. If for some reason you don’t get paid, you’ve got problems. That’s why it’s smart to schedule those bills to start processing the day after your paycheck is due to arrive so you have time to back out of everything without getting hammered on overdraft fees.

  15. kimdog says:

    Rationally, I understand the point of view. I mean, when you buy something with cash you are out the cash immediately, but walk away with a good or service. So why should a debit card be different? They were never meant to give you a “window” time by which to deposit money.

    That said, I feel for the folks that depend on those windows. When I was in college, I routinely kited checks to make it through the weekend while my Friday check cleared. Had that not been possible, I would have been in a world of hurt.

  16. John Stracke says:

    @wobudong:

    Once you realize your debit card is missing and notify the bank, you’ll be OK. It’s that time between loss and alerting the bank than could make a big difference to you.

    Every debit card I’ve ever had (6 different banks) had a $50 fraud limit, just like the statutory limit on credit cards.

  17. j.a.s.o.n says:

    @Slipgrid_: “Anyway, 5th 3ed, suck as they do, is most likely the best bank in Ohio.”

    That statement is flat out nuts given that Key Bank & National City are both headquartered in Ohio.

  18. rocketslide says:

    5/3 is not a pleasant bank to use, regardless of this policy. I am with them only because of a car loan, and the instant that is paid off, I am closing my account. Good riddance.

  19. SadSam says:

    Somehow it seems unfair to me that the banks can electronically clear checks (those checks you write to DirecTV and others that clear the day the Merchant receives them and you don’t get a copy of the cancelled check) on an account can count the pending transactions against an account but holds deposits for a week or longer. Shouldn’t there be some parity between how long a bank can hold a deposit and how quickly they clear a check, seems like right now they have both time periods working in their favor to rack up overdraft fees.

  20. Nighthawk Foo says:

    What I don’t understand is why people even bother with debit cards. A credit card gives you a buffer between you and the merchant – you’re spending VISA’s money, not yours. I like being able to float expenses up to 28 days before paying the bill – it means I’ve kept the money in my account that much longer. In addition, with a cash back card, you can get 1%-5% of your charges back just for using it. A debit card offers you none of that.

    From a strictly financial point of view, debit cards are a worse deal than credit cards, assuming that you never carry a balance.

  21. Smoking Pope says:

    @SadSam: Yeah, doesn’t seem fair, does it?

    Kinda like how banks order the transactions to screw you over:

    $100 in your account
    $5.00 pending
    $10.00 pending
    $15.00 pending
    $101.00 pending

    Assuming $20/overdraft, if they process them in the order listed, you get nailed for $20. But if they order them in the reverse order, you get nailed for $80. Guess which way my bank has tried to do it to me in the past?

  22. JasMi says:

    This sounds Luddite-ish, but if you use cash for little stuff like groceries and drinks and dinner you can end-run the whole debit/credit system.

  23. tcabeen says:

    Off topic: Great image in this post. Anybody got her number? Ok, kidding about the latter, but I do dig the image.

  24. Charybdis says:

    @Smoking Pope:

    Yeah, it sucks. Items always pay largest to smallest, with fees and other internals posting first. That’s so they can assess more NSF fees.

    Though there is a flip side. Which would you rather have bounce, that $600 rent check or that $50 grocery check? By paying largest to smallest there’s a better chance your more important checks will clear and your smaller (and usually not as urgent) checks will be the ones that are returned.

  25. mac-phisto says:

    man, the whole banking lobby has weighed in tonite! good job, sticking up for those poor banks! especially 5/3. where have i heard that name before? RIGHT! that’s the bank that lost 47 million debit cards in the TJX scandal! guess they’re getting a head start on paying off all those lawsuits!

    everyone thinks this only affects ppl who abuse their account & don’t know what’s in there. news flash: you’re wrong. here’s one example (trust me there are many): you have $100 in your account. you go to the gas station, swipe your card & select “debit”. a pre-authorization is sent thru to your acct. to make sure the money is there (usually $75…it’s only $1 if you select “credit”). you pump $50 in gas, knowing full well that you have plenty of money in there. you go to the bank the next day & you’ve been hit w/ an overdraft fee because the gas station has $125 in pending charges. never mind that $75 of that is NOT coming out of your account & will expire when the $50 is posted.

    & on rentals – if you use a debit card for a deposit, but then pay with a different card, that hold will not expire for up to a month. same goes for hotels. just a heads up for you there.

    recognize this for what it is – an attempt to draw new ppl into a fee stream typically reserved for those that abuse the system.

  26. FLConsumer says:

    I’ve never used 1.666667 for a bank, nor have I ever used a debit card, but everywhere I’ve seen promotional lit for them, they claim it “Works like a check…” according to the credit union’s Visa Check Card brochure I have sitting in front of me. In such case, I’d assume it’d have all of the exact same problems that I would with a check, including possibly being overdrawn, etc. As was mentioned above, it’s illegal to write a check for more than what’s available in the account. Debit cards are no different.

    From the credit union’s legal disclosure on the card:

    “Use… of the ATM/Visa Check Card to obtain cash, goods, or services at any authorized terminal may be charged to your checking account and treated as if it were a ‘check’ pursuant to these agreements:

    The Credit Union cannot honor stop payment requests on ATM/VISA Check Card withdrawls.

    Due to the nature of the travel industry, the ATM/VISA Check Card is not recommended for use in securing hotel or auto rental reservations.”


    People need to realize that this happens all the time with credit cards as well. If you’re got $500 in pending charges on your credit card, you’re out that $500 of your line of credit with that company. Not sure if they charge interest on that amount or not, as I’ve always paid my bills in full, but I’d imagine they could do the same.

    As for me, it’s credit cards & separate ATM cards only, no debit cards. If someone’s money is going to be in dispute, I’d much rather it be VISA’s than mine. Besides, I don’t think there’s a debit card out there with all of the cool services & rewards that the higher-end credit cards get.

  27. desonos says:

    @Charybdis: I want a choice in the matter. I hate the “which would you rather clear” argument – I have a good relationship with my landlord, and if I bounced a check on him he’d call me, I’d write out a check for rent + ~$25 (whatever the returned check fee was), and all would be well. I’d much rather give him some money than the money-grubbing bank.

  28. mrbenning says:

    @shashashocking: I think the credit card distinction is what’s most important.

    I used to bank with 5/3rd in Ohio and will never bank with them again. They’re fee hungry. Also, their debit/mastercards tend to not be accepted as debit cards in a lot of places. You have to use them as a credit card, which means you can rack up a lot of pending transactions, which means you can get a lot of overdraft fees for transactions that haven’t gotten through yet.

  29. Charybdis says:

    @mac-phisto:

    I don’t know what bank you use, but here at Chase pending transactions only affect your available balance. That means you might get denied when trying to take money out of an ATM or otherwise use your card somewhere, but you won’t get charged overdraft fees until the pending transaction posts. If it doesn’t post, no fees (unless you go overdraft anyway).

    @desonos:

    It does suck not having a choice, but it nets the bank more money in fees this way so it’s unlikely to change. I didn’t mean to say it was a good thing for you, just that there were good and bad things about either posting method.

  30. Smoking Pope says:

    @Charybdis: Yeah, I understand that posting the largest first can help prevent an important check from bouncing, but I seriously doubt they’re doing this out of the goodness of their own hearts :)

    I once had a mortgage payment come out of my account when my paycheck was a day late. They presented the mortgage payment first (which bounced), then about 10 other things. So I got nailed with $300+ in overdraft fees. Then, they returned the mortgage payment.

    I called them up and pointed out that if they’re not going to cover it, then I shouldn’t get nailed with the overdrafts for all the other items. To my surprise, they agreed and removed those charges.

  31. Charybdis says:

    How it works here is a posted (paid) NSF (non-sufficient funds) item will cause every following item to be overdrawn. However, an unposted (returned) NSF doesn’t affect the balance so items after it might very well pay normally. The bank basically uses a voodoo based matrix to automatically determine whether an item will be posted or unposted.

    Now the catch. The matrix may post an NSF item. An officer may then come along and, deciding he doesn’t trust you, mark that item to be returned the following day. This will show up as a credit to your account the following day, though it might not be visible to you on the statement (it is to us on our systems). This way not only does the item get returned, but you get hit with overdraft fees you never should have incurred, not to mention the possibility of other items being returned.

    There is no procedure for fixing this problem. The officer is ‘expected’ (but probably not required) to pay and waive fees for any items that would have paid clear if the return had occurred in the matrix, but you know damn well that rarely happens. Your only recourse is to complain until they reverse the fees.

  32. hborstad says:

    @Raanne:
    yes, a debit card is like a check card, only if you say, rent a car, you are authorizing a certain amount. Let’s say it comes to $100. The rental company will authorize or put on hold $200-500 to cover extra expenses such as gas, damage ect. Same with hotel rooms. You didnt write out a check for $200-500. Why should you be penalized by nsf fees for something you didnt purchase? Especially concidering that sometimes even after the car is returned or you have checked out of the hotel, and the charge is then run for the exact amount (the $100) it can take up to 2 weeks for the financial institution to release the authorization and add the difference back into your account.

  33. hborstad says:

    @FLConsumer:
    “People need to realize that this happens all the time with credit cards as well. If you’re got $500 in pending charges on your credit card, you’re out that $500 of your line of credit with that company. Not sure if they charge interest on that amount or not, as I’ve always paid my bills in full, but I’d imagine they could do the same.”

    This is true – however if you use your credit card to rent a car and they put $500 of your available credit on hold, and one of those $1 gas charges uses up more than what is remaining of your available credit…ex: $525.00 credit limit, -$500 on hold, -30 gas = $-5.00 available…..the credit card company doesnt charge you a NSF fee until BALANCE actually exceeds the credit limit. They don’t base it on your available credit – Which is how the bank should look at it for checking accounts as well.
    regarding the other statement –
    credit card companies do not charge interest on pending authorizations. Only on transactions that have posted to your account and then how the interest accrues is determined by that company’s agreement terms you signed up for. I have worked at two prominent credit card companies and I can verify the policies were the same for both places.

  34. genc85 says:

    to everyone that have been confused by the pending transactions, the reason why 5/3 removes the funds from your account immediatly is becaue a pending transaction means that its going to be proccessed, in which case it helps you NOT to overdraft, it actually makes it easier for you to know how much money you REALLY have in your account, as opposed to Bank of America or Wachovia, banks that will not list the pending transaction in your realistic available balance, therefore confusing you to spend money you DONT really have so they can charge you $35 per transaction! i just swiched to 5/3 from BofA and wachovia, and could not be happier!

    P.S. If the pending transactions are confusing you so much, do what i do… I use my cell phone calculator as a balance reminder. Its really simple, you enter the amount of money you have in your debit account, and keep substracting the items that i buy every day, see most modern cellphones keeps the last calculation up in the calculator, thus leaving you with the balance each time you substract.. EX: i have $2000 in my account, i put that in my calculator in the phone, i exit the calculator, later on i purchase clothes worth $526.98 , i pull up my calculator which still has the number 2000 i put there earlier, i substract 526.98 and im left with the number 1473.02… later i go to starbucks and buy a coffee for 4.25, i pull up my calculator which has the number 1473.02 saved, i substract the 4.25 and im left with 1468.77, and so on, most phones will not delete the last calculation until you do so, that way I ALWAYS know whats REALLY on my account….. i hope I helped peeps :-D