Because My Beloved Employer, in a huge and clumsily managed outsourcing of its payroll processing to PeopleSoft, botched paychecks and in many cases simply failed to pay some people, I arranged overdraft protection in the amount of one month’s pay. It was a relief to know that my automatic bill payments would not bounce of my paycheck didn’t show up–a distinct possibility, given the dozen pay periods it took PeopleSoft to get my check right.

After all that dust settled down, one weekend I made an online transfer of about $500 in error. I quickly switched it back, but the overdraft protection kicked in. On Monday I visited the credit union, where a rep said she thought nothing would happen but I should keep an eye on it. Duh! In my senility, I instantly forgot it. A full month later when I went to reconcile my accounts, lo! there was the loan, still fattening my checking account and ticking away interest. The cost was about twelve or fifteen bucks, not enough to bankrupt me, and well worth the expense had my account run dry and the gas, electric, water, mortgage, and insurance payments been at risk of bouncing! If I’d stayed awake and alerted the bank rep more promptly, the cost would have been almost nil.

Maybe this is just another reason to do your banking at a credit union. :-)

In the documentary, Karney mentions that is is common for banks to post the day’s withdrawals first, from largest to smallest amount, then post the day’s deposits, in order to make sure your bills get paid (or whatever you happen to be withdrawing money for) and to open up the possibility for earning overdraft fee on top of overdraft fee within the same day.

In addition to calling Wachovia, I called Wells Fargo, Citibank, Commerce Bank, and Chase to clarify their policies. The results are interesting, and I’ll post them tomorrow.

Here’s a situation…
- You have $10 in your account this morning (with nothing else pending or on hold)
- You go make a $50 purchase at noon
- At 1pm you make a $50 deposit into your account

You will NOT have an overdraft. As long as it’s the same business day, credits will post before debits. Feel free to call 1-800-Wachovia and ask them.

Searching online for some corroboration, many customers agree that Wachovia, like almost all other banks, posts debits before credits.

This is not true. Banks might be different, but my understanding is that all banks apply credits first. I work for Wachovia, and I’m 100% sure that is the case with us. The key to remember is that the banking day ends at 3pm, so after that it’s the next business day. Sure, we stay open after 3, but that’s for your convenience…it doesn’t mean that transactions are processed differently then they were back when all banks closed by 3!

Thanks for mentioning this….I really despise those bank fees.