The other day I had to write a check to my AC/heating guy. It was big enough that I knew I had to move some money from my savings to my checking account. Then I thought about it for a moment and figured: “Oh, I get paid tomorrow (direct deposit). So my check (the one I wrote to the AC guy) should go through with no problem.”
A couple of days later I go to my online banking to find that I was charged $25 for an overdraft fee. I call the bank as I’m sure this is a mistake.
After talking to the lady on the phone I discover that (at midnight) they FIRST do all of your debits THEN do all of your credits!!
So the jist of it is: 1.) Debit the check so the account goes negative. 2.) Charge the customer $25 for an overdraft fee. 3) Credit the account two seconds later with the poor bastards paycheck.
I did some whining and got my money back; but still. That’s fucked up.
Yes, that’s how pretty much every bank I’ve ever done business with does business.
Most banks allow customers a certain number of overdraft “forgiveness.” They will not advertise this number, and my understanding is when you call into their support line the person working at the call center basically pulls up your account on the computer and hits a button. It then tells them if they’re allowed to forgive the overdraft fee or not. Last I heard from “the internet” you probably won’t get more than 1-2 from most banks in a calendar year. Additionally I believe if you mention things like a death in the family, loss of income or et cetera in your phone call they will give you overdraft forgiveness even if you’ve already done it a few times in a calendar year.
But you have to call and ask for it, and usually ask insistently. Banks like those fees.
It’s honestly always been the case that if you write a check to someone, you need to have money in your account either right then or you’ll run the risk of getting an overdraft fee or bouncing a check, it’s been that way my entire life.
Essentially banks don’t see checks as a line of credit, it’s supposed to mean “this is a transfer of money that sits in my account to another person.” If you try to do such a thing without enough money to cover it, then it means you’ve given out that check when you didn’t have the money to process it, which you actually did in this case. You wrote that check the day before you got paid, and the guy you gave it to immediately deposited it. Banks do all the debits first because you aren’t supposed to spend on 2/4 based on expected credits on 2/5, and banks hold you to that and assess fees if they catch you doing it.
What I’m more surprised about is that the check hit your account so soon. Direct Deposits generally go in at midnight. You had just written the guy the check the previous day. That’s pretty fast.
I agree the check you wrote hit your account awfuly fast, unless the guy you wrote it to cashed the check at the bank or has a bank account at the same bank
What you were doing is called Paying the Float, and generally banks tend to discourage it as an irresponsible activity that ends up putting them at risk (if you don’t, or can’t pay).
That doesn’t mean I agree with them, and I don’t think the fees are in place for that reason alone, it’s also a nickel-and-diming situation.
However, the really messed up thing is they order withdraws from largest to smallest, so if you write three checks for 1.00, .50 and .50, and you have 1.01 in your account, you’ll get hit with…
1.01
-1.00
=.01
-.50
=-.49 (OD FEE)
-.50
-.99 (OD FEE)
Instead of 1.01-.50=.51-.50=.01-1.00=-.99 (OD FEE)
True, it was fast. I wrote the check wed morn and the check went through at 12am Friday morn. (You’ll have to forgive me. I work the grave yard shift so my perception of time can get quarky on occasion.)
You have to be careful playing the float these days as even small companies can get the ability to instantly and electronically process your check like Wal Mart does (when you give them the check and they read it and give it back to you).
Last year my property tax check got to the bank before I could transfer money and I was terrified about fees from the bank and from the village but the bank holds checks for a few days then redeposited it. It’s a local credit union so that might be the difference. I’ve never bounced a check before so I don’t know what the policy is for frequent bouncers. I have automatic transfer from savings to checking but credit unions only allow you to have a certain number of accounts so I keep my longer term savings at a different bank.
It’s amazing, isn’t it, that banks are willing to take money OUT of your account instantly, but if you deposit a check, they want to sit on it for 10 business days. I think that the rules should be the same on both sides…if the bank wants to hold onto deposits for 10 days, then they shouldn’t take money out of accounts for 10 days. If they are willing to give credit for deposits instantly, then they can pay out instantly.
Plus, of course, banks LOVE those overcharge fees, it’s how they make money.
Yes, banks do that (and process smallest checks first) to maximize the number of penalties they can charge you. Overdraft fees are one of the biggest sources of incomes for banks, or, as one Wells Fargo representative once put it, “one of our most popular products.”
My bank has a credit card option that automatically gets charged for overdrafts (with no penalty except the usual credit card usury for cash withdrawals). I’ve had it for a decade and never needed it, but it’s nice for peace of mind.
It makes no sense to me that the banks debit before crediting, especially when the credit predates the debit. But they do that. I think OD fees play a big part in a bank’s revenue.
Ah. Your OP made it sound like you wrote this guy the check on Thursday, not Wednesday, which was why I was amazed that it got processed so quickly.
Still, that’s pretty fast for a contractor. Places like Kroger, Wal Mart, etc I would never try to play the float with. I do this sometimes with my kid’s daycare center though. They take eons to process checks.
A lifetime ago, I worked at our local newspaper – a very small operation, it consisted of Ed (the Owner/Editor/Writer/Publisher), and me (everything else). After putting in a couple of years, my name was put on all the bank accounts just in case anything ever happened to him.
I stopped working there about a dozen years ago, and a few years later Ed passed away. Without him running the show, the paper went under.
I had assumed that Ed had taken me off of the account after I left, but a few months ago I got a letter from his family explaining that this account was still there with over a thousand bucks in it, and could I please close out the account and send the money to the estate.
I finally got a chance to get over to this bank earlier this week. They couldn’t give me the money right away because it had been frozen due to inactivity – it would take them a day or two to get things back in order, and then I could close out the account.
I went back on Friday, and yes, they were all set – here’s your $60 sir, thank you come again.
Ummm…that’s fine, but where’s the other $1,000 or so? As it turns out, they were helping themselves to $15 each month for the past five or six years – even while the account was frozen and unaccessible, they were still siphoning off their cut. Fuckers.
And as a bonus, now I have to write a letter to the family explaining that the $1,000+ they were expecting is actually only $60, and no, I’m not a liar who is pocketing the bulk of the cash.
FWIW, the bank I use, Huntington, changed it’s policy so that it does not do this. They always credit deposits before taking out withdrawals. It’s something they advertise.
I actually had a similar situation to the OP’s - a debit charge hit the day before I was paid. I would have left me with 6.00 in the account. When I went on line, they credited my pay check before taking out the debit. My running balance was never less than $100.
I’m sure a bunch of folks will now post examples of how Huntington screwed them over, but I’ve been happy and they appear to have made the decision to make their niche will be the bank that tries not to screw over their customers.
Hal, at least you can get bank statements for those years to prove you’re not a damned dirty thief. I learned my lesson about closing accounts out, too - they’ll happily charge you fees on inactive accounts forever. There’s probably laws that prevent them from continuing to charge fees once there’s no money in the account, or you’d be owing THEM money.
