Can you think of a reason to do this, besides the obvious? The $500 comes from overdrawn protection, but you still get charged a fee if the total gets below that. I can’t think of any reason for a bank to do that other than to try and encourage people to overestimate their balance.
The bank my parents use is reporting this to be standard policy now. And I’m trying to think of a reason not to help them change banks. Right now, I’m on empty.
That’s absolutely stupid. Change banks, and tell me which bank it is so I can avoid accidentally patronizing them.
So you’re saying that if the account actually has $2000 in it they are reporting the balance as $2500? And then (presumably) hitting them for an overdraft if the reported balance drops below $500?
I would say it is outrageous and there is no legitimate reason for that.
Credit Union time.
That’s more than outrageous, that’s probably illegal. Unless the $500 is clearly labeled as “available credit” rather than actual cash on hand, I’d report it to the state banking authority and see what they say.
Assuming it is an interest-bearing account, is the bank paying interest on the extra $500? If not, then you are probably correct, and the bank is encouraging your parents to draw on the $500 and then charge them fees.
I would not be surprised if your parents were to draw on the $500 and then put it back into their account, the bank would credit the entire deposit to pushing the balance as far above $500 as they can, and still charge the fees. That is, you have $500 in “extra” balance, you spend $450, then deposit $500, the bank reports your balance as $950 and charges you for the overdraft. And continues to charge until you send them $450 and tell them to credit it to the overdraft, specifically.
Regards,
Shodan
When I look at my balance online there are two numbers: Account balance and available balance. The available balance fluctuates due to holds etc and it includes my overdraft but the account balance never does. Are you sure there aren’t two numbers available and they’re only looking at the higher one?
Is this a bank or a brokerage? Brokerage accounts will often report cash, amount available for withdrawal (includes margin), amount available for stock purchase (margin, plus the additional margin from the purchased stock). If it is a regular bank and a regular checking account, then it does sound very scummy.
That’s exactly why they do it. Before the regulations changed a few years ago requiring customers to “opt in” before banks could charge fees for “courtesy overdrafts,” there were a few banks that did that without even making it clear that part of it was overdraft coverage.
Just in case the IRS happens to notice your bank account, does that extra $500 look like taxable income?
There’s a principle called Occam’s Razor which is paraphrased as:
Do not attribute to malice that which can be attributed to stupidity.
I think reversing the Razor would be wise when speaking of a bank.
At one time, a long time ago, in a galaxy far far away… Anyway the way I remember overdraft was it was sort of a line of credit and you had to apply and get approved for it. There were 2 ways to use it. One was to write a check, perhaps make a ATM withdrawal, for more then you had, which the remainder would come out of overdraft, which there would be no fee but they would charge interest simular to a credit card. The other way would be if you had enough in your account but not available yet, you could withdraw into your unavailable balance up to your overdraft limit, their would be no interest as long as the unavailable balance came available.
Now overdraft seemed to morph to lets give you the chance to make a mistake so we can charge you for it.
Hanlon’s razor, actually.
Occam’s razor is, roughly, given multiple scenarios for a situation, the simplest answer is most likely to be true.
Not all banks are evil. I have business and personal accounts at a small, local bank. When my balance on my personal checking dropped below $0 (whoops) they transferred enough to cover me from my business account. No charges/interest/threats/etc.
Sure, I’ll tell you which one: First Federal. And they flat out told us this was what they were doing when my parents called in when they figured it out, because, guess what? They did wind up with an overdraft. Well, actually, seven in one day. In their defense, they had recently direct deposited around $500, and, when told their balance, assumed that meant it had cleared. They didn’t figure it out until the next pay period, this time having done meticulous balancing that they had been more lax on before.
They did refund us $130 of overdrafts because of what they did, and the lady did say they’d always give the real balance from now on, but she did say it was a new policy not to do so unless specifically asked, and not just an error of the bank teller, even though she also try to simultaneously blame it on the new software. Since posting this thread, I’ve talked to some other people who had trouble with this–they also now hold direct deposits, which is weird.
I’ve talked with my parents, and we’ve agreed to wait until we make sure everything is squared away, and then change banks. It kinda sucks, since we used to know the people who founded this bank, and they were good people. But ownership has changed. And apparently not for the better.
To tell the truth, this is what I thought the answer would be. I mostly posted to you guys so I could show them this thread.
I’ve seen this on ATM receipts and it’s annoying as hell. We have an overdraft line of credit - let’s say it’s a thousand dollars. So we have 600 in the bank, and the ATM receipt will say something like “600 balance, 1600 available”. Took me a few seconds to figure that out the first time I saw it. Bizarro.
In fairness, this is a line of credit and we genuinely could spend the 1600 without incurring a fee (but would pay interest obviously). But it’s still confusing.
It’s been that way since I’ve been using ATMs, i.e. almost 20 years. It’s not like it’s a new thing, and if you’re a penniless student with a free overdraft facility, it’s more useful (and comforting) to know that you have “£143.88 available” than that you have “account balance -£356.12”. 