Doper Bankers: A question about overdraft fees

Factual Questions
1

Okay, I admit it. I was careless and miscalculated and I overdrew. ONE transaction and I’m not claiming any immunity from that particular overdraft fee.

Let me set the story (this is simplified, but essentially accurate). I make three transactions at the same merchant over three days, all small amounts (less than $10). The first and second transactions are (upon review) covered by the amount of money in my checking account. The third is not, through an error on my part. I don’t realize that the third is an overdraft until later that day, when it’s too late to cancel the sale. Fine, I think, I’ll have one overdraft fee…won’t break me and I’ll be more careful from now on.

BUT, when I check my account online yesterday, I see THREE overdraft fees, one for each of the last three transactions. I doublecheck my math, and yes, the first two are COMPLETELY COVERED by the money in the account. There aren’t any outstanding hidden transactions that might have impacted this. Other than that last transaction and the fees, my account reconciles.

I called M&T customer service last night and spoke to a CS rep, who explained that the merchant held the three transactions and posted them simultaneously, which is why the fees are on all three. But, says I, two of those three are legitimate transactions for which there was money to cover. Why would I get fees on those? Did the merchant put them in as a single transaction? Then there should be ONE fee, shouldn’t there? Because if he put them in simultaneously but singly, the fees shouldn’t have been triggered until the last one. I got the repeated assertion that the merchant had held them and posted them to the bank simultaneously.

Now, I may have missed something here. I was in a state of rather high dudgeon and trying not to take it out on the poor CS rep.

Here’s the apparent order of posting, according to what I’m seeing on my online statement (this is in reverse order, reading down to up, like my statement does):



Transaction        Amt      Balance

Overdraft Fee     $37    -$110
Transaction #3    $ 5    -$73
Overdraft Fee     $37    -$68
Transaction #2    $ 6    -$37 
Overdraft Fee     $37    -$31
Transaction #1    $ 5     $ 6
Original Balance          $11

I want to know why the overdraft fee for the first transaction is on there…that’s the one that made the 2nd transaction an overdraft. The only thing I can see that I should owe them is the third overdraft fee, because that’s the only transaction that’s actually an overdraft that’s MY fault.

2

“simultaneously” is a bit misleading here. He posted them on the same day, but as individual transactions, not combined into a single transaction. Nor should anyone expect that he would do that, given that the purchases are on separate receipts.

My experience at several banks is that when several transactions are posted together, they process them not in the sequence in which they occurred, but from highest value to lowest value. (I will not hijack the thread on a discussion of why they do that.) It has happened to me on several occasions that my highest (and sequentially last) transaction depleted the account, causing 4 or 5 overdraft fees, even though in time sequence there was enough money for all them them except the highest and last. Usually, when I complain, they reverse a few of the fees.

But that doesn’t seem to be what happened to you. Regardless of sequence, they could have paid any two of those transactions. I have no idea why they charged you three times.

3

I’m surprised the CS rep didn’t simply waive the two later fees assuming you agree to pay the first one. You could call back and dispute the charge; this would send the issue over to another department with someone with more authority to waive or otherwise resolve the issue (I think…my friend is a credit card dispute rep, and that’s how it works at her bank).

Can you get overdraft protection at your bank? I’ve had 100$ of overdraft available since I was 20, precisely in the event of this type of transaction issue. The bank just offered it to me, though I never had as little as 11$ in the account. It might be something to ask about.

4

I’m going to my local branch on Saturday (only time I have available when they’re open) and talk to somebody. I mean, it’s not going to leave me destitute (or any MORE destitute, anyway) if the charges stay on, but it would be nice to have that extra $74 back. It just doesn’t sit right with me that they did it in the first place.

5

Smart move. It is easy to dismiss a customer’s complaint over the phone. However, talking in person with a real, live human is another matter. A reasonable person will retract two of the three overdraft fees.

Why did the bank do this in the first place? Because they can. That appears to be the essence of business etiquette these days. A business will extract blood money from their customers because they know a sizable percentage will not see it, nor do anything about it if they discover it. That leaves a minority of people who will decide to fight them on their turf (in person). Of course, those customers without the luxury of an on-site visit probably have practically no chance at all.

You may want to avail yourself of regularly reading the Consumerist web site, now owned and managed by the same folks who bring you Consumer Reports. Not a day goes by there isn’t a blood money horror story similar to yours. However, there are also success stories, using the tools and suggestions on that site where customers get their problems fixed, and money returned.

6

They did it because they’re scum, is the best thing I can figure out. I know, not helpful from a GQ standpointbut I’d definitely bet they somehow figured how to post things to make it work out to their advantage to your detriment and are hoping you won’t complain. If laws are passed to make this sort of thing illegal, they’ll complain loud and long that it’s impeding their profits and soon nobody will be able to get a bank account. But I’m not bitter.

I suspect you can get them to reverse 2 of the 3, since any reasonable person would have expected them to post the way you expected. If they won’t - any chance you can vote with your feet and move to a different bank? do you have access to a credit union?

And do ask if they offer an overdraft loan feature. Even if there’s a fee involved for triggering that, it’s going to be less than 37 bucks.

Thanks for mentioning the bank name. They’re the ones who hold one of my mother’s IRAs, and they’re the ones who a) were trying to persuade me to move all of my money to them (hah! what money???) and b) screwed up the IRA rather badly last fall and nearly costing me 6 grand in taxes and penalties.

7

Yeah, when I first opened this checking account, the bank was Mid-State Bank, a local (about 10 counties in central PA) bank. Then they joined a consortium called Keystone Financial, after which they were bought by M&T. I’ve noticed a lot more dirty tricks since M&T bought them. The problem is that almost ALL the banks do that, and with all the consolidations going on, there are almost no “local” banks anymore.

I’m eligible to join PSECU (the Pennsylvania State Employee Credit Union) and I think the next time they send a rep around to the office, I’m going to sit down and find out some information.

8

Overdraft fees are the work of the devil. Especially for someone like me who pays for just about everything with their checking/credit/debit card.
Making 6 random purchases on a payday and for some reason they deduct those purchases before they deposit your check can hit you with over $100 in fees.

The solution for me was the free overdraft reserve account (US Bank). If you overdraw your balance the amount just goes onto a seperate account like a credit card. Then you just pay it back when your paycheck clears and pay the $1.20 in interest it racked up in a day.

9

Gotta laugh! Heaven only knows where Mom’s IRA was originally held - quite probably by one of the smaller ones that got bought up.

In fairness to M&T, they did fix the situation with the IRA by re-coding the account correctly, and I haven’t had any problems with them since then.

10

jayjay, from what you’ve described here, I can say with a good deal of confidence that what you’ve run into is a special class of overdraft fee known as the Unavailable Funds fee. Explaining it is tricky on a good day, but if you’re willing to bear with me, I’ll give you the lowdown. (Fair warning: the explanation will piss you off, because the UAF fee is evil. Please don’t kill the messenger.)

I’m assuming that at least one of the transactions listed is a check card purchase, correct?

[Note: this part is an explanation of how check cards work; skip it if you’re aware.]

When you use your check card, the money does not come out of your account immediately. The reason that it seems to is because (in almost all cases; there are exceptions which I won’t get into here), as soon as you make the purchase, the bank places a “hold” on the amount of your purchase, which subtracts the amount from your current available balance. This hold stays on the account for about 2-3 business days, depending on the bank.

Meanwhile, the merchant receives a sales draft with an authorization code for the transaction, which they must then submit to the bank to have it processed and receive their money. When this happens, the transaction posts to your account.

[/explanation]

Another thing you’ll need to understand is that, from the bank’s point of view, you have two** balances at any given time. The one you’re most familiar with is your “available balance”. That’s the amount of money available for your immediate use at a given point in time. It’s the figure you get when you check your current balance online or via phone, and it takes into account check card holds or credits (say, a cash deposit you made earlier in the same day) that have not yet posted to your account.

Then, there’s your “posted balance”. That balance reflects only transactions which have already posted, and will not take holds/credits into account. Your posted balance, along with the record of posted transactions, is what you see when you look at your current statement online, and this is (quite understandably) the source of much confusion for your average banking customer.

So, now we get to the infamous UAF fee. A simplified example might help.

Say I have a checking account with $100 as my posted and available balance, since my last purchase, ten bucks worth of gas at Exxon, has already posted.

I go out and spend $90 at Best Buy. My available balance is $10, because there’s a $90 hold on my account. That night, a check I had written for $20 posts to my account. Well, because I only have $10 available, I get a $30 Unavailable Funds fee. Makes sense, right? Well, here comes the evil part.

The $30 fee takes my available balance forty dollars into overdraft. The next day, Best Buy submits the sales draft for processing, so that transaction posts to my account. (Note: in reality the following steps all happen simultaneously when the transaction posts, but step-by-step is easier to follow.) The hold on the $90 is released, bringing my available balance up to $50. My account is then debited $90, which is given to Best Buy. Whoops! Only $50 available, so I get an overdraft fee. When I wake up in the morning, I’m seventy bucks in the hole.

Of my two transactions (the $90 and the $25), I had enough money to cover either one of them on their own, but I get two fees, thanks to the magic of the UAF fee.

The icing on the cake: recall that, when you check your statement online, what you’re looking at is your posted balance; it won’t show anything (holds, etc.) that was affecting your available balance at the time. So, when I look at my online statement to find out what happened, here’s what I see:



Transaction          Amt            Balance

Exxon                  $10.00        $100.00

Check #65              $20.00        $80.00

OD fee                 $30.00        $50.00

Best Buy               $90.00       -$40.00

OD fee                 $30.00       -$70.00

Basically, the long and short of it is that the Unavailable Funds fee can cause multiple overdraft charges for what, to any normal non-bank-employee human being, seems to be a single overdraft. During my days at the bank, I took great pride and pleasure in refunding the damnable things with wild abandon.

Sorry for being so long-winded, but I hope it helped clarify. If you’re having trouble applying this explanation to your current situation, I’d be glad to examine it for you, but I’d need the specifics on the nature of each transaction (check card purchase, paper check, auto debit, etc); feel free to PM or email me.

11

Thank you, Roland! That was a perfect explanation. I understand what happened now, and I might be able to use that to help on Saturday when I speak to someone at the branch.

And you’re right. It’s evil. Stupid banks…

12

Holy cow! Thank for fighting my ignorance!! I followed that explanation, and it’s fascinating how they do that. Infuriating, too. They somehow manage to turn a single overdraft fee into two, and don’t back one out when things settle down and one of the charges should have gone through just fine. ARGH!!!

Jayjay, I sure hope you’ll be able to get them to remove those two fees. Bastards! Go for the credit union account if you can - if nothing else, their overdraft fees are probably a lot lower!! They also very likely have excellent online features (ours does), free bill-paying, and lots of other goodies.

13

I screwed up with TCF and I didn’t realize it because I have the simplest free checking, but I didn’t realize TCF will simply pay the check and charge you. So I had two fees. What I did was make the mistake of paying the bill online and I have one checking account TCF for bills and the other for personal. And I pulled down the TCF account for these two accounts and I should’ve pulled down my other bank account. So it WAS my fault

I thought

TCF (In account) - $100

First bill $125.00
Second bill $50.00

I figured first bill gets bounced and I get charged $35.00. Second bill gets paid and I don’t get charged

So I figured it to be

100

  • 35 (first overdraft fee)

65
50 (paid second check)

15 remaining

But no, TCF will PAY your bill and charge you. My account went like this

TCF Amount (100)

0100
-125

-025 (amount I owe TCF)
-035 (amound of overdraft fee)

-055 (Amount I’m overdrawn)
-050 (amount of second check)
-035 (amount second overdraft)

-140 (amount due to TCF)

So you see it depends on how they pay the bills etc. Different banks vary. TCF will even let me take more money out of an ATM than I have in the account. I just assumed if I have $100 in the bank and I try to take $120 out of the ATM it’ll say “NO,” but my account will give me the $120 and charge me an overdraft fee. (Fortunately I’ve never done this)

14

Markxxx, it gets even stupider. The same thing could happen with using your check card, and it is a lot more evil.

Let’s use the same numbers that you had, but spend them a little differently. (By the way, you made a small math error: The amount on the “Amount I’m overdrawn” line should have been -60, not the -55 you had.)

Start out with $100. Spend $50 on Monday with your check card. That $50 is now on “hold”, and your “available” is down to $50. You have done absolutely nothing illegal, immoral, or even unfair. :slight_smile:

On Tuesday, you spend another $125. :eek: Yes, that was a mistake, and you are going to pay for it, literally. :frowning: The bank graciously does you the “favor” of approving the charge. Your “available” is now -$75 ($75 overdrawn). When you realize what you did, you figure you’ll end up paying a $35 charge, and you’ll be $110 below zero.

But that’s not what happens. Here’s how several of the banks I’ve used handle it:

It’s now Wednesday, and both of those charges show up at your bank to get posted. To me, the whole concept of putting funds on “hold” means that they are in reserve to pay the charge. They should have no problem paying the $50 charge, right? I mean, they’ve been holding your money hostage as “unavailable” for two days!

But when several charges arrive at the bank to be posted on the same day, they process them in order from highest to lowest. So, starting with your posted balance of $100, they first remove $125, leaving you at $25 below. Then they charge a $35 overdraft on it, putting you at $60 below. Then they pay the $50 charge, so you are $110 below. And a second overdraft fee, so you have $145 below zero.

The fun and honest world of modern banking! :mad: :mad: :mad:

15

But at least they paid the checks. otherwise, you get a bounced check fee from your bank and one from the merchant you bounced the transaction with.

I was in Wal-Mart last night and the bank that rents space from them stopped me to try to convince tme to switch to them. Presently I bank with BofA, who I don’t particularly like, but I don’t have any major beef with them. The only thing they could tell me to sell me on them was they have free overdraft protection. I never bounce checks. I never come close. To me, although I don’t like BofA, it’s not worth having all the automatic debits for utilities cancelled and redone through another bank. If it wasn’t for the convenience of being able to pay my bills automatically, I’d be tempted just to stash my money in my sock drawer.

StG

16

jayjay, I’ve had this exact issue with M&T before as well (though my irresponsibly surpassed yours on paper, generating five (!) unavailable funds fees).

I found that the people at the State College branch (where I was spending most of my time) were more than willing to waive almost all of the fees. But then I was told I had to talk to the people at the branch where I opened my account, hours north in Sayre. The people at the Sayre branch were not nearly as nice, and told me that they didn’t care how business was done at the State College branch - I would be paying all the fees.

I argued my way down two paying two of the fees. All in all, it was a pretty unpleasant experience. I’m interested to hear how your experience goes. I’m hoping for the best.

17

At which point you transferred your account to the State College Branch…right?

18

I moved to Colorado, and then Shanghai, and then things were busy, and then <insert excuse>.

Good call, I should really get on that.

19

This is one reason I do all my “banking” at a credit union, and have since about 1982. Yes, they charge overdraft fees like anyone else, but they are (a) less than what banks charge, and more importantly (b) are non-profit and therefore do not manipulate things for maximum evilness.

20

Anyone have any idea who we might complain to in Washington about this stuff? I’d write to my congressman, but I can’t figure out how to phrase it so that it doesn’t sound like a whiny complaint.