Watch Out For These 5 Overdraft Traps

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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  1. bohemian says:

    Our current bank won’t allow you to tie a savings account to your checking any longer. They now only allow what they call a “Visa” branded overdraft line of credit for preferred customers (people with over 100,000 at the bank in various accounts).

    We keep a second debt card for hotel payments. That keeps them from tripping up our main card. They still need to put a legal mandate on how long someone can hold your money, say 24 hours?

  2. Darascon says:

    I got raped by that whole “reordering the way we’re going to process your transactions” bit to the sum of 13 $35 OD charges. The bank didn’t clear monies I deposited to them before taking out all of the withdraws in whatever order they felt like. Dirty bastards. It’s amazing what a weekend can do to you when the bank clears everything on Monday as they see fit.

    As for that “Authorizing transactions that trigger OD’s” got me in the same incident, even though I had an account linked for OD protections, I still got charged a different fee for using it.

    Banks are sneaky people, and it taught me a lesson to watch fund transfers closer.

  3. RichasB says:

    reading this reminds me of bank of America and all the “fun “that I had with them. Glad I’m with Wamu now.

  4. JustThatGuy3 says:

    Or, alternatively, stop using a debit card, and start using a credit card instead. Yes, you have to be disciplined about your spending, but you write one check a month, and you have at least a couple of weeks of lead time.

  5. Wormfather is Wormfather says:

    I’m gonna be banned from the site for this but. I fucked up big time last week.

    My rent went in at $1,500, I forgot to transfer funds from savings and just like that I was overdrawn by $900, another $180 in transactions(made before the check was sent) genereated came through in sucession generating 10 overdraft fees. the bank waved all but three of them, but still that’s over a $100, ($35 per fee). But I know the banks are the way they are, I’ve no one to blame but my self…and the dog, damned dog.

  6. meg9 says:

    Are there banks around that don’t use more than one of these tactics? I think they all do.

    I try not to use my debit because of the length of time it takes for a transaction to post—it gets confusing.

  7. meg9 says:

    wormfather, link your checking to your savings, man!

  8. nicemarmot617 says:

    #2 happened to me …it must have been about 6 years ago, when I was in college. It was my former bank, WAMU. Needless to say I could not afford multiple $35 charges when my weekly paycheck was about $100. When I saw the overdraft charges on my card, I walked into my local branch and asked nicely to have the bs charges reversed. When they refused, claiming the whole thing was my fault, I threw a screaming shit-fit in the middle of their office. I believe I accused them of being criminals, of taking advantage of poor college students, taking advantage of poor people in general, being scammers, etc etc. That worked!

    Now I use a cashback credit card for everything. Back then I didn’t have a credit card, except one for emergencies.

  9. OMAC says:

    @ Meg9

    Check out your local credit union. They are usually friendlier than the banks while giving better service.

  10. loueloui says:

    Washington Mutual is really bad about this. I have checked my account on line to see what money was available, and made a withdrawal or purchase. Then magically, another transaction posts in the past prior to other transactions, and puts me over.

    This has happened more than once. I even went so far as to take a screen cap of their online banking. Their excuse was that their online banking was not ‘official’ (HA!) and that I should keep a check register.

  11. madanthony says:

    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.

    I don’t know. I think “make sure you have enough money that you don’t get overdrawn” is not horribly unreasonable advice. Yes, banks have it set up so they can make a ton of money if you overdraw, but but aside from credit card holds – I can see how this might sneak up on someone – you really shouldn’t be writing checks or making debits with money you don’t actually have.

    Which is why I use a rewards credit card for pretty much everything and pay it off in full every month – I get to borrow other people’s money for free, don’t get overdrawn, and get a small amount back

  12. econobiker says:

    @loueloui: And a check register does not accurately reflect how they process transactions anymore. I bet if someone showed a bank their check register, the bank would still say the line about largest transaction first…

  13. wiggatron says:

    This just serves as a reminder to myself that I should continue to purchase everything with my credit card and then pay if off. 1 transaction is way easier to keep track of than 30+ a month for myself and the bank.

  14. SkokieGuy says:

    My local community bank offers an overdraft line of credit. I have a 2K limit, with a low token interest rate. Not only does the bank access the line of credit if needed, they do not charge any fees for doing this.

  15. lol_wut says:

    National City re-ordered transactions on my account and caused me to incur approximately 12 $36 overdraft fees on my account at the beginning of this month. They gave the same BS explanation that they were insuring that the largest transactions were covered first, which is complete and utter bull. What kills me, though, is that they will intentionally then show the date of transactions in your ledger as the dates they cleared rather when they were really made. Instead of making my house payment on time, my car payment on time, and being slightly in the black going into my paycheck that week, I had nothing. My paycheck was smaller covering $432 in overdraft fees, obviously, and National City could have cared less in the process.

    To make matters worse, I’m in the middle of a Chapter 7. Fortunately I do have an attorney and I was able to make arrangements on my house and car payments.

  16. lol_wut says:

    I should also add that I was waiting for a $700+ deposit to clear, which they conveniently re-dated to show was made available on Monday.

  17. Scottey says:

    I work for a bank. I will not keep my money in a bank. When I get paid I go and withdraw all of the funds. Everything is paid for with cash. If I am going to order something off of the internet I put enough cash in the account to cover the transaction. With interest rates on savings accounts the way they are you are better off locking it in a safe at home.

  18. Etoiles says:

    @SkokieGuy: Hell, my Bank of America checking account has a $1000 line of credit. When I first got my, “new! try this!” Visa CheckCard in March, 1999 (granted, it was BankBoston at the time) they attached the $1000 line of credit and explained how it would all work. I’ve never overdrafted since, because there’s an extra $1000 buffer right there on my checking account in case of whatever. (When I started a new job and they direct-deposited my pay into someone else’s account, for example, that came in HANDY.)

    There is interest on it but since I’ve never let my checking account sit with a high balance on the credit line for more than 10 days, I’ve never had to pay more than about twelve cents. And there are no fees or anything.

    It’s been so easy and effortless for now 9 1/2 years that I’m always boggled people put up with this overdraft nonsense from other banks — or even from my own.

  19. Murph1908 says:

    My mom taught me the $100 buffer trick when I was 11, working a paper route. It has probably saved me a nice stack of change in the past 2+ decades.

  20. 420greg says:

    Don’t use your debit card for anything but an ATM.

    Use a credit card:

    You don’t have to worry about gas/hotel holds.
    You can rent a car.
    You have purchase protection.
    Extended Warranties.
    You can reverse the charges.
    Rewards, etc.

  21. darthzaphod says:

    $100 in buffer money in a checking account would be a great idea….if I ever had more than $100 bucks in my account to begin with.

    *sigh*

    I’ve had battle after battle with Wells Fargo about overdraft fees, and have nearly bitten the heads off a fair few unsuspecting bankers in the process. And don’t let them fool you with that “overdraft protection” crap. IF you connect your WF checking to your WF credit card and happen to overdraft in your checking, they automatically pull $25 from your credit card as a “cash withdrawl” no matter how much you’re over by. Then they charge the credit card $10 for the service. Factoring in the insane interest rate of cash withdrawls on a credit card, you actually end up paying more for overdraft protection than you would on an overdraft fee. Bunk!

  22. HogwartsAlum says:

    I like the buffer. Now that I’m making a little bit more than I used to, I’m trying to keep it in there. I’ve been overdrafted before and it SUCKS.

  23. mac-phisto says:

    got news for you guys – this is only the beginning. “noninterest income” (which is mostly what we all call fees) is the fastest growing segment of banks’ balance sheets. since investments & loan portfolios are not performing as strongly as hoped lately, banks will be looking for more ways to help part you from your money. be wary!

  24. beckalina says:

    I’m 25. When I was in my late teens/early twenties, I constantly overdrew my bank account. Over the years, I probably paid at least $400 in fees. My account hasn’t gone into the negative for more than three years now. How did I manage this feat? I know how much money is in my account. I keep track. Once I write a check or swipe my debit card (which, contrary to what many people on this site say, do work for some of us), I consider that money to be gone.

    I understand that mistakes can happen. But one way to keep these to a minimum is to keep yourself educated. Know how much of a check gets put on a float hold and for how long. Write everything down. If you write a check, consider it gone even when it hasn’t cleared. Maybe, like me, you’ll learn that it wasn’t the bank’s fault, after all.

  25. CRSpartan01 says:

    Does anyone else have their debit card tied to a non-existent credit card associated with the same bank? At my bank, if I overdraft, it will shift the payment to the credit card (which I actually tossed a long time ago) and then I can pay that online without paying anything more ridiculous than a standard APR. Usually I know that I’ve overdrafted far enough ahead that I can pay off the credit card before any damage is actually done.

  26. kerrington.steele says:

    like EtoilePB, I’ve had a $2000 overdraft protection account linked to my Citibank checking for over 7 years now (first as a student and now as a full-time worker). it was free to enroll when I opened the account, and while if I actually overdraft Citi does charge interest on the amount of “Checking Plus” I use, it never adds up to anywhere near $35 by the time I pay it all off. people should ask their banks (yes, even the big evil ones) about overdraft protection accounts and the terms/fees associated, since you may save money if you have an emergency-related overdraft or just need a little “advance” on your checking for a short period.

  27. SharanyaKnulla says:

    Citizens Bank charges you $39 in overdraft fees and will hit you up to 3
    times within a matter of minutes if you overdraw. I overdrew my account,
    then deposited more than enough money to cover the fees and negative
    balance – however, since their hours are so bad, I had to deposit the
    check to an ATM before work around 8:00 a.m. When they began hitting my
    account with even more fees when they opened, I flipped out since it
    said my account balance was in the positive.

    Their customer service person told me “oh well if you deposit to an ATM
    it can actually take up to FIVE days for us to process that check, why
    didn’t you deposit to the branch?” Oh, I don’t know… maybe because I
    have to work to avoid your overdraft fees. Jerks.

    Ginger Lennon

    Racepoint Group

    Phone: 781.487.4640

    Glennon@Racepointgroup.com

    Follow me on Twitter: Gingie822

    - PRSA Silver Anvil Winner 2008

    - United Nations Grand Award for

    Excellence in Communications 2008

  28. TheWraithL98 says:

    very good advice overall

    “5. Taking a day or more to release funds on hold”

    i called and complained to my bank about this one specifically yesterday. I noticed that a few times filling up gas, my available balance dropped over $100. I guess the gas stations put a $75 hold on, then you fill up the gas, they drop the hold and charge you actual $$$ for gas. Well the bank charges the charge, and the hold lasts for 24-48 hours still, so if you bought $60 of gas, your account drops $135.

    I can also add another 2 to the list that are specific to my bank obviously trying to maximize fees:

    6.My online banking setup mails checks out to those vendors that don’t take electronic payments. Before the site used to deduct the money from my account when the check was sent out and send a bank check. Now they just write a check against my account on my behalf, so it doesn’t show up on my record until the check is cashed. and after the check has been sent by the bank, it falls off the “pending payments” page, so if the check is sitting a while (weeks at times), it comes out of nowhere.

    7.Not an overdraft fee generator, but a slimy fee generator nonetheless. Out of network ATM fees went from free for years to $.50 in 2006 to $1.50 in 2007. In 2008 they didn’t up the fees, but I’m noticing their atms say “Temporarily out of service” a solid 30% of the time now, which gives no choice but to use an out of network at times.

  29. lol_wut says:

    I understand that mistakes can happen. But one way to keep these to a minimum is to keep yourself educated. Know how much of a check gets put on a float hold and for how long. Write everything down. If you write a check, consider it gone even when it hasn’t cleared. Maybe, like me, you’ll learn that it wasn’t the bank’s fault, after all.

    Yeah, I see what you did there. There still remain times where the bank has done things in order to generate a profit out of an opportunity that should never have been there to begin with. Taking transactions out of order, claiming they took place at different times in order to justify what they did as in my case, is how I got robbed.

  30. facingtraffic says:

    @beckalina: Even if you do consider that money gone when you write a check or use a debit card for a transaction, they will screw you with the reordering.

    I had this happen when I was in college. I was getting ill and I had to make a visit to the campus nurse. At the time I did not have a credit card. Anyway, I knew I was going to get nailed with one overdraft fee. No problem. I can handle $30…I’ll just transfer that much more from my credit union account into my checking. So I go about my day and made a few other purchases, with the doctor’s visit last. Lo and behold, the bank reordered my account and I got nailed for 3 or 4 overdrafts.

    There’s no way to keep track anymore. My mom told me to write it all down in my checkbook, but what good does that do when the bank takes what I would have written down in chronological order and reorders it to potentially benefit themselves the most?

  31. Ragman says:

    I messed up online one time and transferred money into the wrong account. Ended up overdrawing my checking account. The worst part was the bank only informed me via snail mail, so I ended up with two more overdrafts before the first letter arrived. I never asked about it, but I’m sure I’d get some line about the “official” letter notification vs “unofficial” phone calls or emails.

    My bank had a sign up about getting a second account for use with Paypal and the like. I’ve been meaning to ask about the overdraw protection on it – not allowing overdraws would be half the reasons for getting one, as far as I’m concerned.

    The banks are having to also make up for the lack of monthly service charges. They used to run $3 minimum, and would try to upsell you on the ~$8 package. That was the primary reason I’ve always used credit unions.

  32. no.no.notorious says:

    @Wormfather is Wormfather: well, i hope you’re not banned from the site (free forum! why so strict?)

    either way…
    I think the buffer money is definitely necessary, but 100 is probably a bit much. At least 50, because hopefully people check their finances enough to recall what they’ve purchased in the last couple of days to realize if they should transfer money.

  33. Mysterry says:

    What you can also do is put money into a Savings Account as an “Overdraft Protection” WITHOUT having to pay an overdraft protection. What happens is when you overdraft on your checking, they will transfer money from your savings into your checking account making it a zero balance. You should check with your bank though, because I know some banks do this process for free while other banks will charge you about $1.50.

  34. beckalina says:

    @facingtraffic: In your case, I agree that what the bank did was shitty. But unless it’s an emergency, like your situation . . . The bank reordering transactions wouldn’t matter if the sum of all of the transactions was more than zero. My debits rarely ever come out exactly as they’re swiped. Some take several days, others take 24 hours.

    I’m sorry if what I’m saying isn’t coming across the right way. It’s just that I had a real problem when I was younger and hate when people find themselves in the same trap. I have a friend that is constantly overdrawn and continually blames the bank for it. 2 times out of 10 it has to do with the things listed in the OP. The other 8 are entirely my friend’s fault. I’ve heard the line, “The check cleared sooner than I thought it would!” More times than I can count. It gets frustrating sometimes.

  35. YoniX says:

    My favorite bank nonsense would have to be when I make a few SMALL purchases like a sandwich here, and a container of milk there, and then for 2 items I am hit with $70 worth of overdraft charges. There has got to be a better way.

  36. picardia says:

    My bank allows the link to the savings account, which is a good thing. I would think that today, with online checking (when it’s reliable), it would be easier than ever to avoid overdraft. But things happen.

  37. Tawnie is Monster Mashing says:

    Bank of America has been getting too many people on the reordering scam as of late. (yes, I know I should not bank there but I have been there for 14 years) They did not get me but they have been a bit aggressive in trying.

    I was in there last week trying to deposit my severance from a Fortune 500 company where 10% of the company was laid off. They were going to hold the amount until the 30th and this was the 15th. They told me if I had 10k in the bank they would have released the funds immediately. I did not agree so I opted to wait on the bank manager. While I was waiting the manager got screamed at by three people for the reordering scam.

    They finally agreed to release part of it one day and the other part 10 days later. I knew they were trying to get more fees and I certainly did not want to play their game. The manager finally told me she was canceling the transaction and I needed to take the check to chase and cash it. I had to go all the way across town to chase and cash this check then redeposit the cash at Bank of America. Needless to say I’ll be leaving BofA as soon as possible.

  38. johnva says:

    @facingtraffic: They can’t screw you with the reordering unless you overdraft in the first place. That practice may compound the pain from that, but they can’t do it if you don’t overdraft in the first place. It’s just never a good idea to perform debit transactions when you know you’re going to overdraft. Better to keep a cushion of money in your checking account if you insist on using a debit card.

  39. Caslonbold says:

    I purchased an item from a vendor that is sold by weight. They put thru an authorization on my debt card for $1.00 then put thru an authorization for $600 which was the approximate cost before weighing the item. After weighing the item the total bill was for $602.00 so they put thru a real charge for the $602.00 which cleared in 24 hours. My account still had the $600 authorization pending for 5 days until it would “drop off” – so 5 days I had no access to the $600.

    I called the company, they called the debit card company and they had the hold lifted manually/over the phone.

    I learned you can request a “hard charge” to be put on your card. This means the company would hard charge the $600 and then hard charge the $2.00 difference and no pending authorization this way to muck up the accounting for other items I had purchased on the card.

    This worked at the gas station today also. I put thru the debit card and said hard charge my card for $40 and I pumped exactly $40. Better than doing the “fill up” where they hold $75-$100 of your money and cause overdrafts on your account.

  40. meg9 says:

    Very good idea to use the CC instead and just pay off each month. I think I’m going to try this. I had a 35 dollar cup of coffee at Starbucks last month because of being 2 dollars overdrawn :(

  41. johnva says:

    @tawni: I wouldn’t necessarily assume they were “trying to get more fees” just because they placed a lengthy hold on a presumably large check. They were probably just being overly paranoid about getting their money. Yeah, it could create overdraft fees if you didn’t pay attention to when the hold was released and spent part of the deposited money…but that would be a separate problem on your part.

  42. JDAC says:

    I do a couple of things that have stopped overdraft fees dead.

    1) I use my debit card as a credit card, particularly on gas-pump purchases (fuck those $100 holds!). My last two banks also offer rewards for using the card this way and I’ll be getting 300 bucks in October just for buying shit.

    2) Most importantly, I use MS Money because I DO NOT trust the online banking to show the correct “available balance”.

    I used to be terrible at managing my money, although I almost always got OD fees reversed. Since using MS Money, I never get hit by fees.

  43. Snarkysnake says:

    Not for everybody,but…

    Take a look at ING’s “paperless” checking account. I have found that this makes an effective countermove to the other big banks unethical practices.It works like this:

    The account pays interest. Nothing to get too excited about,but it beats nothing at all.You have to start an ING savings account (online or snail mail) and link your regular checking account/savings account at your present asshole bank electronically to ING. When you have the “Electric Orange” checking account set up,you can do electronic bill pay,or send paper checks to businesses (ING pays the postage !). You can even schedule your payments for any day for the next year .This can be used to thwart the Chase and B of A practice of changing your due dates to trip you up and generate a late fee.

    Okay, “paperless”. Everybody asks about that. You do not order checks. All checks are issued by ING from good funds.If you do not have an overdraft line established with ING,you cannot send a check that would bounce. Period. If the money is not in here,they will not issue a check. If you DO have an overdraft line,and the money is not in your account,they will send the check and charge NO FEE. NONE. You will just pay interest on the overdraft for the time that you use the money. (The rate is currently about 9%-very fair).

    Now. This takes some getting used to. But, it is a great way to strike back at the pirates at Chase, Bank O’America and the like and still live your life.

    I have had a couple of small glitches with ING. They’re not perfect. Never forget that they are a monster bank ,too,just based in Holland. Their phone support could use lots of work. But how different is that from other big banks ?

    Works well for me. Thought I would share…

  44. johnva says:

    @Caslonbold: The annoyance caused by gas station holds was the reason I finally stopped using debit cards altogether and went to credit card only, FWIW.

    @JDAC: Totally agree about keeping your own detailed records. I don’t trust the “available balance” notation either, as I frequently saw it jump around as authorizations were placed and lifted back when I used a debit card. Although to be fair…that mostly seems to only be a problem for debit card users. The available balance is pretty reliable now that only checks and ACH transactions ever hit my checking account.

  45. thebluepill says:

    Wachovia Practices ALL of these tricks..

    They are pretty ruthless about it too..

    To make matters worse, when I first started using their bank, I thought I could trust their Online Balance Sheet, like I could with a previous bank.

    Amazingly, I could check balances one day, check all of the “holds” and what not, and the very next day, everything was different on the online ledger. the way they record transactions, holds and deposits are soley to make low balance holders slip up.

    to make a long story short, My account showed $600 in there, with all of the holds I thought I had. the weekend goes buy with a bunch of small purchases.. Look in the account.. Im over $800 in the hole.. $665 of it was OD Fees to cover small Purchases.

    Wachovia was less than Sympathetic with me and “generously” offered to refund 3 of the 19 OD Fees..

    Granted, It was my fault, but shelling out 600% interest on a 1 day loan stings a whole bunch.

  46. johnva says:

    @Snarkysnake: I like ING, and have accounts with them. But I have to say that I don’t really like the way their “good funds” check issuance thing works. I would prefer that it work the way that BoA online banking does, which is that they don’t withdraw the money from your account until the recipient of the paper check actually gets it. The big problem with ING’s setup is what happens when a check somehow gets lost or the person never deposits it. What happens is that it takes quite awhile (90 days or something) for ING to give you the money back, and you’re not earning interest on it the whole time. So that could be a major annoyance if it’s a significant amount and not some minor thing you can just cover in the meantime.

    So I use their EO account, but only for electronic debits to pay my other bills. I don’t use the paper check feature. Maybe some people would like the fact that the transaction is instantly accounted for, if you’re not good at keeping track of your funds. But I am, and I keep detailed records separately. So to me it’s just a needless annoyance for them to take the money from me before the other party gets it.

  47. readams says:

    Why the heck does anyone use debit cards? They’re worse in every way than credit cards.

  48. johnva says:

    @readams: I’ve asked this question many times, and the only conclusion I can come up with is that people simply manage their money in different ways. I personally keep very detailed records and budgets, and don’t overspend. Which means that for me, and people like me, credit cards are an obviously better choice (because of all the obvious advantages). But other people seem to simply spend money and figure out how it balances out later. And for that type of person, I could see a credit card being a dangerous tool to use. But I do have to wonder if all these horrendous overdraft charges I hear about do not outweigh the occasional slip-up causing interest charges on a credit card, even if someone isn’t perfect about always paying off their credit card bill. Obviously CC’s are not a good idea if you’re a compulsive spender, but otherwise I think it’s a no-brainer to use one.

  49. HonestNigerian says:

    “suggests you ask your bank to set your debit overdraw amount to zero”. Bank of America refused to do this when I asked. They said, it’s in the agreement that they can pay it and charge a fee.

  50. @Lunaped: YEAH RIGHT. We have a checking and savings account with Citizen’s Bank in NY- You can set up your savings account to be used in the event of overdraft in your checking… good idea, right?

    Too bad it costs $15 for EACH OVERDRAFT to use your OWN MONEY. They justify this by saying “It’s much cheaper than the $38 you would of been charged.”

    My husband is a truck driver, and he would use the debit card while I watched the account online and paid bills online or used checks. This system didn’t create overdrafts, but got very close at times, so we opened a new account with our credit union. I go every week, deposit his weekly “allowance” and I’ve already declined signed the paper saying I don’t want the bank to authorize charges when the money’s not there. It’s a great way for him to control his spending out on the road, and I don’t have to worry about bill money disappearing.

  51. caligulala says:

    @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.

  52. 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.

  53. mindshadow says:

    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. :)

  54. Snarkysnake says:

    @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…

  55. 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.

  56. ajlei says:

    @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.

  57. othium says:

    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!

  58. lordargent says:

    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.

  59. Miguel Valdespino says:

    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.

  60. angelman says:

    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…

  61. usa_gatekeeper says:

    @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.

  62. EllaMcWho says:

    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.

  63. Tank says:

    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.

  64. Tank says:

    above: have=have not

  65. KitanaOR says:

    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.

  66. MercuryPDX says:

    @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.

  67. AustinTXProgrammer says:

    I use several financial institutions and authorizations don’t post until they clear, so number 5 has never gotten me.

  68. ghost77 says:

    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.

  69. @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”.

  70. Grive says:

    @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.

  71. Geekybiker says:

    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.

  72. Subliminal0182 says:

    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.

  73. Subliminal0182 says:

    Oh, and never trust ATMs.

  74. jswilson64 says:

    @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.

  75. Tzepish says:

    @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.

  76. BrandonW says:

    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.

  77. johnva says:

    @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.

  78. physics2010 says:

    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?

  79. crashfrog says:

    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?

  80. SadSam says:

    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.

  81. NotChoinski says:

    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.

  82. SadSam says:

    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.

  83. DantePD says:

    @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.

  84. johnva says:

    @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.

  85. Dyscord says:

    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.

  86. drjayphd says:

    @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.

  87. crashfrog says:

    @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.

  88. Subliminal0182 says:

    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.

  89. Mozoltov, motherfucker says:

    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.

  90. kabuk1 says:

    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.

  91. mac-phisto says:

    @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.

  92. crashfrog says:

    @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.

  93. mac-phisto says:

    @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.

  94. k.conscience says:

    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.

  95. crashfrog says:

    @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.

  96. JoshReflek says:

    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).

  97. mac-phisto says:

    @crashfrog: oh, yeah – that’s definitely shenanigans.

  98. shadbeck says:

    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.

  99. Stile4aly says:

    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.

  100. elisa says:

    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!