There are two very specific ways banks are raking in the dough—your dough—thanks to slight changes or details in their policies. In the past, if you were to write a check or use your ATM/debit card to withdraw an amount higher than your balance, the check would bounce or the debit would be denied. Now most banks allow the transaction to go through, but charge you an overdraft fee.
In addition, if your overdraft “protection” is linked to a line of credit, like the Electric Orange Checking Account offered by ING Direct, you can be charged interest on the amount overdrawn.
My primary bank, Wachovia, employs this procedure, and chances are your bank does as well. When more than one debit takes place on a day, the debits are applied from highest to smallest amount. So if you have a balance of $100 on January 1, and on January 2, the bank applies debits of $75, $50, and $25, the first debit won’t cause a problem. The second debit will bring January 2’s balance to -$25, triggering an overdraft fee. The third debit will bring January 2’s final balance to $-50, triggering a second overdraft fee.
Only after all debits have been processed will the bank process any credits to your account. You could get charged an overdraft fee even if a deposited check clears on the same day the bank processes your debits.
That may not be the end. The overdraft fees may each trigger more overdraft fees, since your balance is still below zero. If you’re a good customer, theres a good chance you can get at least the meta-fees credited back to your account.
The best solution is not complaining after the fact, it’s prevention. Know your balance and don’t write checks for money you don’t have in the bank (minus any other outstanding checks).
More info is at Banks Make More on Overdrafts [USA Today]
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Why are people suddenly “discovering” this and reacting to it? In all honesty it’s likely because it was a slow news day and a large news organization thought it would be a good day to try to give large companies another black eye.
That being said, if this comes as a suprise to you then you apparently didn’t find the time to read your account agreement when you opened your account. If you don’t want the fees you can request that your financial institution not process overdrafts and then you can pay the bounced check charge to the retailer (in some cases that is a $50 charge). Of course balancing your checkbook might take care of the issue.
Jason: If you’ve had an account for many years, then the account terms presented when you opened the account most likely no longer apply. Banks often change their terms on their accounts. One must read all the notices the bank sends in order to catch these changes… many people don’t.
I don’t think this is a case of a news organization giving large companies a “black eye,” but it could have been a slow news day.
Hey, some of these banks are playing around with these accounts—I feel—just to charge some of these fees.
I won’t name names but a bank I had used for over 8 years began playing around with my account.
We all know about the “instant” withdrawal of funds from our account the minute we write a check and the bank’s lax “three-day” float period on money deposited. Now, seriously, if you can take my money out of my account 5 minutes after I write a check . . . surely, you can credit my account in a 24 hour period, right? Their answer: nope.
So, here is the deal. Had a credit card balance of over $10K. Worked by BUTT of to acquire the money to pay it off. Had $13K in the bank (for several weeks). Wrote a check to pay off the entire $10K on the credit card. The credit card company calls to say that my payment didn’t go through. What the . . .
I call the bank. Their response: Oh! Didn’t you know, we changed the terms recently where you have to “notify” us five days before you make a large payment like that. What the . . .
My response: You mean I have to actually notify you to take MY money out of MY account and pay MY bills? Needless to say, I paid the bill . . . had the bank paid my insufficient fund fees (because, damn it that wasn’t my fault, I had the got-damn money) and closed the account two weeks later.
They (the banks)are playing around with us and our money, guys. And they are making grand-theft dough on us. Dang-it, I gotta get me some bank stock.