Banks need your money. They’re not doing too well on their own, and you’re not screwing up enough to generate the fees they need to make their shareholders happy. That’s why they’ve set up sneaky ways to maximize your every mistake—or in some cases, ways to change the rules so that you make new mistakes where you didn’t before—in order to penalize you. Here are five things SmartMoney says to watch out for.
1. Authorizing transactions via debit card even if it triggers an overdraft fee
“Debit card use triggers 46% of all overdrafts, according to the Center for Responsible Lending,” writes SmartMoney. Keep an eye on your spending and never trust the bank to let you know if you’ve spent more than you have. As a “courtesy,” they’ll approve your transaction, then apply a fee.
SmartMoney suggests you ask your bank to set your debit overdraw amount to zero, so that any transaction that would be rejected in the real world will also be rejected by your bank.
2. Reordering transactions to maximize the number of them that can be considered overdrafts
“Banks justify the practice as a way to ensure the most important debits get processed first (say, so a mortgage payment doesn’t bounce).” This is utter bullshit. Banks do this for one reason—to generate more revenue in overdraft fees from customers who screw up. Here’s an example:
Say you start the day with $100 in your account. You buy a latte ($5), fill up on gas ($50), buy groceries ($35), swing by the drugstore ($8) and then the dry cleaner’s ($25). Processed chronologically, only the last transaction triggers an overdraft. Reordered from high to low, however, three purchases do.
SmartMoney suggests two things to protect against this:
- Keep an extra $100 or so as “buffer money” in your account, and never plan on using it.
- Always make sure any deposits have shown up as available funds before you rely on them.
3. Extended overdraft fees
If you take too long to pay an overdraft fee, your bank may attach a second penalty fee. One suggestion is to attach a line of credit or savings account to automatically pay overdaft fees—but don’t use the line of credit for anything other than overdraft protection.
4. High daily maximums
Many banks will allow you to generate multiple overdraft transactions in a single day—Chase, for exammple, sets no limit on the number of times they can charge you, and they increase the charges after the first transaction. SmartMoney suggests you negotiate these fees away by pointing out that the trouble stemmed from a single incident, and that the entire unpleasant affair is a rare occurrence for you. (It is rare, isn’t it? Otherwise you’re just giving money away to the bank.)
5. Taking a day or more to release funds on hold
This last one is triggered by merchants—hotels, gas stations—who place holds on your account before you complete the transaction. Banks, however, apparently have no technology available to release those holds in a timely manner, despite the fact that they’re initially placed in mere seconds. If you conduct any business that generates holds on your funds, assume that money is spent until you can confirm it’s been released again.
SmartMoney suggests you use a credit card to pay for things that trigger holds—”While it still counts against your available credit, it’s more likely that account can withstand a tighter balance for the 24 hours or so it takes for the hold to clear.”
Notice a trend here? Most of the suggestions SmartMoney makes to protect yourself amount to little more than socking more money away at the offending bank, or setting up more potential ways for something bad to happen in the form of unexpected fees. If your bank is practicing more than one or two of these bad habits, your best bet is to start looking for another bank or credit union, one that doesn’t view you as its own personal ATM machine.
“5 Sneaky Overdraft Traps” [SmartMoney]
(Photo: Getty)
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@beckalina:
It’s pretty easy to keep track of your income vs. expenses when you are paid on a regular schedule and know exactly how much is coming in to your account. Unfortunately, I own a small business and it isn’t always so simple. I’ve been through the overdraft wringer with wamu more times than I care to recount since the instated this reordering business.
I’ve had my small business account with them for 5 years. Until 6 months ago, I would very seldom overdraw – usually by a few dollars and I wouldn’t grumble about the fee – my fault! My banking behavior hasn’t changed – but the way the process withdrawals and deposits has. One month I had nearly $1000 in overdraft fees from them processing out of chronological order. I probably would have overdrawn a couple of times regardless, but this was just insane.
I’ve now switched to paying my employees via money order and using cash for almost all purchases.
And now they have a new ploy to steal my money! I make almost daily deposits, usually in the form of checks sent by my clients’ banking auto bill system. They are now holding all checks for 3 days and out of state checks for 5 days. And that’s business days. There was no notice of this policy change. My branch manager is just as puzzled as to why this is happening as I am. He can manually release the hold if he happens to be there at the time, but I can’t always make it into the branch during business hours. Right now my available balance is in the 10′s of dollars while my actual balance is in the 1000′s. It’s just another way for them to try to get you to screw up by not being able to keep track.
My partner and I are about ready to firebomb their corporate headquarters and it’s a shame because I was a big fan of their customer service until a few months ago.
Oops, pressed submit too quickly. Meant to add we are in the process of switching everything over to the credit union, 1 joint account plus 1 account in his name where he uses the debit card. I’m done with regular banks.
My bank won’t let me link my savings account to my checking account. We tried to get overdraft turned off and they said they would still charge $30 for the debit card to be denied (even without funds being withdrawn). So, long story short, time to change banks.
@johnva:
Well, I can see your POV, but, IMHO , there are a couple of things here that are anomalies. How often does a check get “lost”? Usually, the person or business puts that sucker in there pronto. Even if it does go into a black hole,you can cancel it and re-send.
Also, everyone needs to keep in mind that the days of “free float ” are gone for them (but not for the banks,which you will notice if you deposit a large check). Writing a check on Friday for money that you just know will be in there Tuesday can cost you more than a payday loan in bank fees if they electronically clear the check.That’s why it’s imperative for people without a large emergency fund built up to find an account without all of the bear traps and shady practices of the Giant Magabanks.By using ING’s EO intelligently,you can turn the tables on these crooks…
8. Not clearing cash deposits immediately. BofA is notorious for this. You deposit cash, they only post the first $100 of it, the rest posts at midnight when the third party company verifies the transaction. If you have any debits that come thru between when you deposit cash and the midnight deadline, you get hit with overdrafts.
@loueloui: When I was a teenager and banking with WaMu, they told me the same damn thing about their online banking not being “official” and said something about it being “rough guidelines”. That and their inability to have a consistent system for which parts of the country they charge ATM fees, made me happy to leave them.
I use Wells Fargo and every two weeks, just before my direct deposit is made from my job, I watch to see what they do. A local store I buy my coffee and other everyday items always submits it’s debit/check card charges immediately, and I see them online almost in real time on my computer. For some reason, Wells Fargo likes to hold one of these charges back on the evening before I get my paycheck deposited. At first I thought I was just being paranoid, but after some investigation, I saw that it was a regular practice. I had one overdraft happen because of this (my fault, as I shouldn’t depend on the online statement, I know..) and since then, wanted to see if they would repeat the same action. Sure enough. The next payday – I went and used my check card to purchase a couple items and they held the charge for three days (and I asked the store owner if he sent the charge in directly – and he told me he did).
It was a fun game for a while, seeing how they worked it. I learned to keep better track of my transactions and to use cash for everyday expenses. It’s really interesting to see how some banks work hard to get overdraft fees.
Very interesting article and thanks!
Best way to avoid overdrafts.
Stop living paycheck to paycheck.
1) Paycheck gets direct deposited.
2) I leave enough money in that account to pay all of my bills at the end of the month, plus a little extra for spending money. (the rest gets transferred to a savings account at ING to earn real interest).
3) At the end of the month, I schedule all of my bills via billpay. Nothing will overdraft because the money to pay said bills has been in the account for weeks.
/also, pay cash or use a credit card for all purchases, pay off the credit card (again using billpay) within the grace period to avoid any interest charges.
Wescom credit union allows me to set up an email alarm when my balance drops below $x. I set the alarm at $200. When I get the alarm, I watch my spending and use other cards until my paycheck is in.
MY experience with american banks when I first arrived here was mind blowing. How could such institutions be legal?
Back in the UK I was used to have $1000 totally fee and interest free overdraft (no need to have a backup savings account). All banking was totally free. I could electronically transfer money for free to any bank in the country, any direct deposits were guaranteed so if there was a problem I was insured against companies randomly withdrawing money without my consent.
When I arrived here I was shocked to find I had to even use a cheque book, amazed that I coudlnt transfer money for free elecontrically to any bank, incredulous at the amazingly low interest rate my account got. It wa like being back in the dark ages. I was quite suprised the bank tellers werent using typewriters to type up my statement. I coudlnt believe people hand wrote in the back of their cheque book their balance every time they made a payment.
Then I got hit with the overdraft fees. How could I be allowed to use money I didnt have with a debit card. It was for my convenience apparently. I quickly put a stop to that but it was hard. THe bank did everything they could to try and dissuade me from cancelling the courtesy overdraft facility.
One day American banks will stop acting like the mob and move into the 20th century… and pigs might fly…
@420greg: Agreed. You’re also NOT letting the debit card password get into retailer databases and other such nasty places where hackers love to poke around.
I got royally done-over by BillPay and my CU – my fault there was insufficient monies when the payment attempted to clear (car insurance, quarterly payment – bounced by about $20 – argh!). This is my fault, because I forgotten that I had set the bill to pay the total amount due, which is the quarterly amount, not the ‘installment plan’ amount of $90. HOWEVER, I had no idea the number of attempts that would be made to process this payment and the resulting NSF funds, which did put my acct into the red. So the $275 check was issued by BillPay to my insurance co. and was attempted to clear 2 Fridays ago. No clear – fine, Allstate: $25 (added to my insurance balance), BillPay $25 (EFT from account), FCU $25 (deduction from account). Monday they try to re-deposit: Allstate: $25, BillPay $25, FCU $25. So now we’re up to $150 NSF fees…So Tuesday, they don’t try to redeposit the bad check, and I get the first notice from my CU (nothing from Allstate or BillPay). I have money in my other bank (my ‘mortgage’ bank) and drive it across town to make up the NSF, not accounting for the accumulating NSF fees. So Wednesday – another attempt to redeposit, NSFs all around! So for a $275 check, I was charged $225 in NSF fees.
Yes I felt like an absolute idiot for not having that $20 in my account, especially since I had the money at the other bank to cover the initial payment in the first place. But the multiple attempts to redeposit with no reaction time for me to rectify the problem is definitely predatory…BillPay, not my CU.
i’m ashamed to say i don’t have the foggiest notion how much my bank charges for overdraft fees, i have had one in the 17 years i’ve had the account. i use my check card (visa branded) as a “credit card” for all purchases, and let the merchant absorb the fee rather than using it as a debit card and and being charged atm fees by my bank.
above: have=have not
The husband and I left WaMu years ago when we would deposit money in the bank, and then go shopping the next day. In the order of processing, the check would show up immediately after the charges just so they could get those overdraft fees.
@RichasB: I’ve been nailed by every one except #3, and yet I still bank with WAMU. They love to reorder transactions. It’s $35 (per transaction) for an overdraft fee, unless you tie your checking to savings… then it’s only a one-time $20 “Funds Transfer fee” for them to electronically move your money for you. You get one “free” overdraft per year, no refund on the transfer fee.
I was nailed most recently because I deposited a check in the ATM instead of the “Night Deposit”. The ATM is not touched until Monday, so any checks deposited in there Friday night will not be fully available until 12:01 AM Tuesday. However, the Night Deposit is opened and processed (as if you went in yourself) on Saturday when the bank has hours.
I use several financial institutions and authorizations don’t post until they clear, so number 5 has never gotten me.
It’s a very sad state of affairs when the supposed institution of banking in our country has regressed to a cartel of thieves. Financial advice now consists of “don’t trust your bank”, as evidenced in this article by SmartMoney.
This is the true market environment that today’s modern “retail banking” has created … my choice as a banking customer has become the choice of which bank will screw me the least. That’s the simple reality of banking today.
I’m nostalgic for the days of banking when one could walk into the bank lobby, greeted with marble floors and fine woodwork. A man in a suit would shake your hand and know you by name, glad to accept your money with integrity.
Today, I walk into a bank and I’m greeted by minimum wage incompetent employees, as I walk across worn out carpet to place my deposit on a cheap formica counter top.
I too recently switched banks away from TD “Bankhell” because I truly believe that the corporate interests at that bank have obstructed even their own sound financial discipline. They became so greedy for an absurd overdraft fee, that they gladly traded my business (worth $180 annually in service fees & small interest payments) for a dishonest $30 money grab. When a bank is willing to trade $180 for $30, they neither have financial discipline nor value my business. Therefore, I am no longer a customer … although, I switched to a bank that I think will screw me slightly less, but I still don’t trust them.
I guess I have to cast my vote for “Bank of The Cookie Jar” and start keeping most of my cash in my hands where fewer people can screw with it, instead of lending it away for free to the thieves of our modern banking cartel.
@beckalina: I had the same problem – overdrawing the account – when I was in my early to mid-20s. Yeah, that was seriously irresponsible and stupid of me.
I did manage to shape up, and I always make sure to have at least $100 in my account as the cushion (like SmartMoney recommends). Also, I make sure to keep track of any extra expenses that come up in the month – I can readily account for a good portion of my money, since it goes to my “consistent expenses”.
@johnva: Actually, they can.
If you have $100 in your account, and spend a total $60 with your card.
Realizing you’re going to make an online purchase and you need $90, you decide to be sure and drop $100 you had under your mattress into your account.
Then you make your purchase.
All’s right, correct? you went from $100 to $40 to $140 to $40. At no point were you in zeros.
Nope.
The bank decided to process the $90, then the 60, which overdrafted you. Then it proceeded to add the $100 to your account.
I just remember 8 years or so getting caught by this. Bank held some big charges around a week. I looked at my online balance and figured its been awhile and made a few purchases trusting that an electronic purchase would clear in a week. Nope as soon as I made a couple small purchases the big one hit and triggered a bunch of late fees. They seriously need to make a law about the length they can hold off processing transactions, and the order they must be processed.
I work for a bank and I’ve seen clients switch over to us because another bank posted things in the order received (ie electronics first, checks last). Their mortgage payment bounced, along with a check for their cell phone bill (I believe), but the soy latte they got cleared the account fine. (I think they were expecting the merchants to wait a few days to put the charges through, as most do).
Needless to say, they got an angry letters from their mortgage company (at the same bank!), cell phone carrier, and because the missed payments showed up on their credit reports, Discover and Bank of America slashed their credit card limits causing over the limit fees and more negative items on their credit reports, all in the same month!
Although banks make is easy to overdraft, they also make it easy to find out your balance on the spot, have a cushion, and generally, not overdraft. When our corporate HQ released the income statements, the overdraft fees income had gone down from previous years. Despite not as much of an income in this field, the CEO still said something like as long as our clients are managing their money and are satisfied with the service they received, the bank is generally in a good position. I’ll try to scan it later.
Anyway, ask about your OD protections, like credit lines or even open up a savings account, link it to the checking for protection (and when you don’t OD, you have that money and any extra towards a big purchase). Most banks now offer online banking, and even more are adding ‘Pending Transactions’ to the Online Banking segment. Something I’m started to use with my checking account is Mobile Alerts, texts I get from my bank detailing things clearing my account, and balance after they cleared, every morning. I text BAL to the same number, I get my balance within seconds.
Another strategy is to deposit your paycheck like normal into your checking, separate your needs from your wants, buy what you need on your credit card and pay it off at the end of the month with the money in the checking. Buy what you want with money that’s left over.
Something we see with our older clients is a total amount of all your bills, groceries, etc. One big withdrawal from the branch of that money, divided into envelopes for each bill, etc. Like $50 for groceries, $20 for cell bill, $30 for dining out, etc etc. Label each envelope and use as necessary.
It’s not 100% that banks are trying to lure us into the negative, rather it’s more the fact that we’re letting them, and not coming up with strategies to work around it. We’re getting used to comfort such as debit cards, direct deposit, etc etc.
Oh, and never trust ATMs.
@Lunaped: Problem with savings account as overdraft protection is some screwy Federal regulation our Credit Union told us about. There can be only 6 withdrawal transactions from a Savings or Money Market account in one month without being present at the bank/atm – it’s called “Regulation D.” So, if you really screw it up, and o/d more than 6 items, you still get hit.
And not to sound too much like a Dad (even though I am one now), but the only way reordering screws you out of your money is when you’ve tried to take more than you’ve got in there in the first place. Living within your means sucks, but not doing so just opens you up to all kinds of abuse, from credit card interest to overdraft fees, to predatory Payday loans and pawn shops.
I constantly have to remind my kids of the difference between “need” and “want” – I wish someone had been there to remind me when I was in my 20s.
@Wormfather is Wormfather: “But I know the banks are the way they are, I’ve no one to blame but my self…and the dog, damned dog.”
Wow, blaming the victim even when it’s yourself!
…just kidding, man.
But seriously, if I walk toward you while constantly punching the air, is it your fault or my fault if you get hit?
@angelman: America is like the rest of the developed world’s China.
For years and years I had Navy Federal Credit Union. They were good and honest, but when I got out of the Navy I ended up switching to a bank close from home. I wanted to go with a CU, but the wife convinced me to go to Bank of America.
Shortly after we switched, I went online and transferred some money from savings to checking and then went shopping. I got hit with the reordering scam and ended up with about 200 dollars in overdrafts. All because the decided that the savings transfer should go last. I called and found out that the online banking wasn’t to be trusted (according to them). We haven’t switched yet as we are in the process of moving to a different city, but as soon as we get finished I am running far from these money grubbing assholes. I just got so pampered at NFCU that I didn’t realize that banks could and would go such underhanded things. There really should be some type of laws against some of it.
@Grive: But in that case your available balance was not above zero at all times, because the deposit had not cleared completely at the time the $90 purchase was made. You won’t overdraft if you always wait until deposits clear completely before making ANY purchase that requires the funds from the deposit. You just have to understand that even if you physically made the deposit before the purchase, the banks don’t treat it as necessarily before unless it has cleared and been released. All that the reordering did was make it so that you had more than one overdraft instead of just one. Crappy, and clearly an anti-consumer practice, but avoidable.
I’ll grant that it’s very hard to keep track of this when you’re using a debit card and have lots of transactions on your account…which is why I don’t use debit cards. Instead, I use a credit card for everything, even a $0.50 pack of gum, and pay a single bill every month. That way, I have some leeway on when I pay within the grace period and can ensure that I have funds available for it. My credit cards are also linked to checking and savings accounts at several different banks, so I can easily pay from a different source if I have a problem with one.
1) It is illegal for banks to process debits before credits. I’m sure they have a loophole with deposited checks and the funds not being available.
2) You aren’t getting any real interest on your saving anyway. Keep enough to cover an entire rent/mortgage check plus some. Believe me it saved my butt when Chase double-pulled in a month because I had just changed the amount added to the principal.
3) Put it on a credit card instead of debit. If someone steals your debit card and drains your account you are in the hole until the bank clears up the mess. If someone steals your credit card and you dispute you are clear. As long as you can control yourself and you have money in the bank to cover the creditcard bill its the best way to go. The transaction charges are already built into everything you buy and are about the same as the store pays for debit card transaction fees. Cash is stupid for anything over $10. You know it costs $28 to print a $20 bill?
Ridiculous advice, akin to “have so much money that you can start your own bank, and not charge yourself fees.” Yeah, real helpful.
Ultimately the most helpful advice is to elect Congressional representatives who will take action against this unregulated, legalized fraud.
Most importantly, I use MS Money because I DO NOT trust the online banking to show the correct “available balance”.
Here’s the thing I don’t understand. Banking is all computerized, right? I mean, the bank isn’t doing it with pen and paper in a check register, right? It’s all computerized and networked.
So if the online balance isn’t accurate enough for me to use, how can it be accurate enough for the bank? It’s all coming from the same database. Why is it showing me a different balance than it shows the bank?
Isn’t that deliberate fraud?
My husband got screwed when he rented some kind of tool. The store took a $300 deposit (he swears they didn’t tell him about the deposit) and he had about 10 OD charges. We were able to get them all reversed.
We have a pretty good system. We keep a $1000 in a Wachovia savings account that serves as my OD protection (there is no charge for OD transactions since we have a mortgage with the bank which counts towards our banking relationship). We have a joint checking account with Wachovia that serves as OD protection for the husband’s debit card.
We do have a credit card that we use for transactions that are likely to trigger a hold (mostly traveling).
[en.wikipedia.org] Check 21 Act is responsible for many of these problems. Banks can hold deposits but debits and checks now clear at a much faster rate.
I think Bank of America’s computers have slowed down as well. I get paid by direct deposit on the 15th. This usually means just after midnight between the 14th and 15th. The deposit is listed as ‘Pending’until the next day, the 16th.
This month the 15th fell on a Friday, and for some reason, the robots that process this stuff don’t work weekends. Or any day adjacent toone. So the deposit – made overnight between Thursday and Friday is considered ‘pending’ until its processed overnight between Monday and Tuesday. The same for any purchases made Friday through Monday.
God forbid three day weekends.
Also when I check my checking account on-line I always review the “check card holds” which helps me keep a better handle on my actual available balance. And I do keep an extra $200 or so in my checking as a buffer.
@Darascon: This exact thing went on with me at Compass Bank. They decided to begin processing ALL transactions before any deposits were processed, without notifying anyone as to the change in policy, for the sole purpose of taking as much cash from me as they could.
@crashfrog: First off, it’s not all coming from the same database, most likely. A lot of banks have horribly outdated and cobbled together IT systems that don’t really work well together. If they added the online banking as an afterthought years later, it might be that it doesn’t always show the most current information.
I do agree with your main point, though, that they should be required to show accurate current account information if they’re allowed to charge people for overdrafts and such. But I’m just not sure it’s deliberate so much as it’s just the result of incompetence. Convenient incompetence, maybe, but I don’t think I believe that they are deliberately lying to people about their balance. I think it’s more just that they have really complex policies and systems that are difficult for people to interpret.
In the end though, you’re much better off just not relying on the banks to keep track of how much money you have available. Keep track of it carefully yourself, and then there is no way they can screw you.
Also, most of the advice given here is quite good. Yes, the banks suck, and most of us agree on that. But that doesn’t mean we’re just helpless and unable to defend ourselves. Some of us manage to avoid all these problems with fees, etc entirely with a bit of care.
My bank does most of these. Thank god we’re switching banks next paycheck. However, while they do reorder the transactions, they thankfully don’t charge for what seems like an overdraft.
Instead they seem to have a seperate balance. One that tells you what you have, and a secret list of what’s going to go through that ISN’T reflected on the website at the moment. Also, they have an interesting stance on overdraft fees. They charge the $35 overdraft fee but then, they charge you again for the number of days you’re overdrawn around a MONTH later, which, if you’re not careful, will send you into overdraft again. Now, if they cause you to go into overdraft then there’s no fee, but nine times out of ten, they will pull this right AFTER you make a purchase of some sort, so even though you have the money when you make the purchase, because the bank took it before it clears (They seem to place priority on these charges BTW), it looks like you tried to spend money that wasn’t there so they charge you the fee for something that was their fault.
@ghost77: That bad? TD Banknorth were practically conquering heroes when they bought out my old bank (Hudson United Bank). I’m finally balancing my checkbook and the $.30 service fees on damn near every transaction… the mind, it is boggled. Only reason I went with Hudson United Bank was because they were the only bank on campus. Bastards.
Of course, now that TD Banknorth’s swallowing every bank it can, they might be sliding more towards evil. I’ll just think of it as a Dark Quickening.
@johnva: First off, it’s not all coming from the same database, most likely.
I know that, when I go to any branch of my bank, and talk to either a teller or a banker, whatever they do for me requires logging into the exact same system, because I look over and watch them do it. It’s one unified system.
In the end though, you’re much better off just not relying on the banks to keep track of how much money you have available. Keep track of it carefully yourself, and then there is no way they can screw you.
With things like gasoline/hotel holds and other invisible transactions, plus the fact that it’s a joint account for me and my wife, it’s completely impossible for me to keep an accurate balance at all times. And, really, it shouldn’t be our responsibility to second-guess the bank. We’ve hired them to do that for us; they’re being paid the interest rate on the investments they make with our cash. And the simple fact is, they must have an accurate electronic balance already. They should be required to share it with me – it’s my money, after all.
Some of us manage to avoid all these problems with fees, etc entirely with a bit of care.
A lot of the care, like a lot of financial advice, basically boils down to “have more money than you already do.” I mean, “keep an extra 100 dollars you never spend”? Quite a few of us are not so rich that we can pretend like we have less money than we do. A lot of us need just about every dollar to get by, and we shouldn’t have to essentially bury some money in a hole, uselessly, just to avoid exorbitant, fraudulent fees.
Let me put it to you this way, and you can see what insulting advice that is. What if your bank came to you, and offered you the chance to pay a one-time fee of 100 dollars, and in return, they’d (at random) waive 2/3 of your overdraft fees. Wouldn’t you be insulted by such an offer? It’s like the bank is coming to you and saying “awful nice bank balance you got there, shame if something… happened to it.” It’s predatory extortion.
But the article wants us to do that to ourselves? Ridiculous. The problem here is that banks have shifted their profit model from investments (stuff that was good for the communities they served) to fraudulent fee structures. It’s nickel and dime robbery.
oh, and another thing. Say you have $50 in the bank, make an $80 purchase, and deposit $50 cash. You’d think cash would be available immediately because it’s certified funds, right? Wrong, kind of. Basically, since you spent the money when you didn’t have the funds, you’ll get an NSF fee. Why? Because there were Non Sufficient Funds when you swiped your card. Can’t buy something then try an cover your butt afterward. If you deposited the cash first, then made a purchase, you’d be fine, as it’s in your available balance.
Also, using a credit card instead of debit card can also be justified like so: with a debit card, you’re using your own money that’s in the bank. With a credit card, you’re using money the bank loaned you, ie the bank’s money. If your debit card were lost or stolen, the bank would take it’s merry time investigating. If your credit card were lost or stolen, you’d better believe they’ll do everything in their power to clear everything up as soon as possible, as it’s their money.
This is why I switched to ING Direct. No overdraft charges, if you go over you get charged a percentage rate on what you overdrafted, not a flat fee like other banks. And it’s charged by the month.
Bullshit policies like these are why I refuse to have a bank account anymore. I had to have one for a large social security deposit for my daughter a few years ago & ended up just using the account. I had a job that did direct deposit at the time and SOMEHOW my account managed to rack up $400 in overage charges even though a $390 deposit was made by my work and I didnt even spend that much. Apparently the bank is on a different space-time continuum than the rest of the world because to them the money was still in limbo even though it was clearly posted on my account. I made sure to keep track of my spending and nearly fainted when I checked my balance a few days later. I did NOT appreciate the “courtesy” of the bank approving my transactions if they KNEW they would result in overdrafts. So my next paycheck deposits, about $200 this time, and it makes NO dent in the negative balance. NOBODY at the bank could tell me where it went either. First incompetence and shady practices, and now outright thievery! I told them to close the account & piss off, and I refuse to EVER pay them back.
@crashfrog: sadly, it’s not all one database. & the bigger the institution, the more likely that multiple databases have to by synced together. for example, bank of america has regional processing databases that sync with regional online databases (that sync with master & mirror databases), not to mention their credit card services which are a completely different ball of wax.
at the credit union i work for, our OLB is synced real-time with our master database (i made sure it would be when i contracted the vendor). every transaction that posts to your account appears instantaneously (key word being “posts”). unfortunately, that doesn’t include pending transactions (especially debit), those are housed in our processor’s database (which isn’t synced) or the merchant processor’s database (if they still haven’t requested full authorization), or possibly even the merchant’s capture equipment (if they haven’t settled their work yet).
& i’m sure i don’t have to go into the fact that check/ach clearing is a whole other beast – there’s no possible way that a bank could know that you wrote out a rent check or made a check payment over the phone before it’s presented against your account. i’m going to assume you’re aware of that.
simply put, even “real-time” databases don’t reflect your real-time balance & it’s mostly a constraint of technology.
@mac-phisto: sadly, it’s not all one database.
Just give me the hook-up to whatever database is telling them that I’ve run out of money. If it’s accurate enough for the bank it’s good enough for me.
There’s absolutely no reason that the bank and I should be looking at different online account balances. That’s all I’m talking about. I don’t need a magic system where the bank looks into the future to see the rent check I’m writing next week; all I’m saying is, the bank and I should be seeing the exact same numbers in my electronic balance, and if they’re showing me one thing but presenting debits against something entirely different, they’re lying to me.
The bank, obviously, has an online system to tell them when I’ve run out of money. There’s absolutely no reason I shouldn’t get balances from the exact same system.
@crashfrog: i’m not sure i understand what you mean by “electronic balance”. i know my credit union has “lag time” with debit transactions – if i were to hit an atm or make a purchase tonite, it wouldn’t reflect in my account until friday (at the earliest). so essentially, i could end up spending my money twice if i didn’t keep track. to illustrate, let’s say i have $100. i hit the atm for $80 tonite & then go into a branch tomorrow for $50 at the teller window. when friday comes, i’ll be -$30 (-$50 after the $20 overdraft fee), b/c the credit union didn’t “know” i had taken the $80. now technically they did (they could access my transactional history on my debit card), but there isn’t a portal that communicates that information until the charge is presented against the account.
if i could make a recommendation, you might consider setting up an electric orange account with ing – you can direct deposit money from your pay or set up a transfer to take place from your main account. i’ve found their information to be about as “real-time” as you can get – you hit 7-11 for a slurpee, & it will show in your account before the brainfreeze hits your forehead. plus they have o/d lines of credit in case you make a mistake – overspend by $100? pay it back in a day & it cost you 3¢. 30 days & it only cost you $1. certainly beats a mountain of $34 o/d fees.
I know I’m extremely late on this one but I just have to respond.
I worked for a bank for about a year and so am very familiar with the way banks will squeeze those overdraft fees out of you. Here’s some information to remember..
- never treat your debit card like a credit card. If you swipe without entering your pin number you will incur a hold (restaurants, bars, and gas stations will do this). This hold can sometimes be $75 or more.
- generally, you CAN use your debit card at the pump without incurring a hold so long as you choose the DEBIT charge button and input your pin.
- remember that a debit charge comes out of your account immediately, whereas a credit charge may not.
- debit/credit holds should disappear once the actual charge gets through to the bank, but some circumstances may cause the hold to remain for up to 72 hours from the time of the charge.
- banks process transations in this order: DEBITS from larges to smallest, then CREDITS. Credits (your paycheck or any money you despoit) are always last.
- checks will never clear the same day. if you are trying to cover a credit charge or check you’ve written, deposit cash. (ymmv on this one, I wouldn’t recommend trying to beat the system with cash.)
- new accounts will take longer for your credits to clear. The holds are supposed to be for a reasonable time (2-5 business days), but a bank can wait as long as a month or more. If the check has cleared from the originating bank, call yours and ask them to release the hold. It’s something they can easily do (unless you reach an incompetent).
- never make deposits through the ATM. if you can’t make it in person, at least do a night drop – it will be processed the next day (except for weekends, generally).
This is a bit long, but I hope at least some of that info helps.
@mac-phisto: i’m not sure i understand what you mean by “electronic balance”.
I’m just responding to all the people who overdrafted, and think it’s their own fault for relying on their online balance statement to accurately reflect how much money they currently have, as though it’s somehow common sense that a bank that runs almost every single transaction – and handles all accounting – electronically couldn’t, at the same time, make that information available accurately on a website.
Like I said, I don’t get it. The bank has a balance figure it’s using already, because it’s electronically determining that I’m overdrafted and electronically applying the relevant fees. So why would their website be inaccurate?
if i were to hit an atm or make a purchase tonite, it wouldn’t reflect in my account until friday (at the earliest). so essentially, i could end up spending my money twice if i didn’t keep track.
Sure. I get it that there’s a lag between when you spend the money, and when the bank knows you’ve spent it.
But the situation we’re talking about here seems to be that your account as visible from the bank’s webpage might not reflect the charge until friday, but if you overdrafted with that charge, the bank would assess that fee immediately.
let’s say i have $100. i hit the atm for $80 tonite & then go into a branch tomorrow for $50 at the teller window. when friday comes, i’ll be -$30
It’s been my experience, with a couple of different banks, that you’ll actually be hit with the overdraft fee on thursday, right after you make the withdrawl, even though the atm withdrawl won’t appear to post until friday. Clearly, the bank knows about it as soon as you make it, because they’re able to determine you overdrafted as soon as you did.
That’s the lag on your account that doesn’t make any sense. If online statements aren’t accurate enough for you to reliably account for your money, how can they be accurate enough for the bank to do so? The only explanation is that the bank is keeping a more up-to-date account, but showing you a lagged account, hoping that you will spend your money twice.
1. Wamu and BofA are both shady as hell with the ‘reordering’ to force OD fees, neglecting to process deposits that would have avoided it in the first place, only after stealing the OD fees from you.
2. I’ve had both banks ‘forget’ multiple times that i told them to fully deactivate any ‘overdraft protection courtesy’. It always ends up with either reversing all of the fees or losing a customer and being forced to eat the fees on top of it.
3. BofA tried to say that due to some government regulation they are required to process debits, as credits, but only on the weekends.
4. An acquaintance/coworker at CalFed asked me to do her the favor of opening a new account so she could meet her quota. After opening it i immediately withdrew all but $1 and let it sit dormant for 6 months. Every month CalFed tried to charge me $3 ~ $5, saying a ‘computer glitch’ did it, even though a manager reversed it and swore it wouldn’t happen again, it always did. (there were no requirements for balance or activity that would constitute that fee)
Moral of it all: Don’t trust banks, find a local credit union.
Throw away all your credit cards (ive never had one and i have never been in debt).
@crashfrog: oh, yeah – that’s definitely shenanigans.
My wifes bank charged her $6.00 for a returned mail fee because she didn’t change her address when she moved. Also They charge an extended overdraft fee of $6.00 a day after you are overdrafted for 24 hours. One more way to screw the consumer out of our hard earned cash. Also one time she wrote a check for rent and the landlord cashed it early they took all the money she had in her acct bounced 3 checks and then put the money back in the following day.
It’s amusing to read the whole thread. An early poster says they’re glad they left BofA to go to WAMU, then someone says they’re glad they left WAMU to go to Wachovia, then someone says they’re glad they’re with BofA and not Wachovia.
Don’t you guys get it? All banks do these things. I’ll give you that some are worse than others (particularly those that do not post debits before credits), but it simply comes down to managing your funds and not overdrawing your account.
There’s no grand conspiracy here, you simply have to take responsibility for your own account.
Can anyone recommend good (large) banks? Please, no “use your local credit union!” suggestions, I don’t use one for specific reasons. I’m currently with WAMU, and they haven’t done anything bad to me yet (mostly b/c I don’t overspend), but they’re not that convenient for my current living situation. And not Bank of America either.
I’m in Southern California.
thanks!