Overdraft Fees

[Lost_in_the_HTTP]

Big article here on them and their effects on banks and customers.

Bloomberg - Are you a robot?

Maybe it's just me, but maybe people shouldn't write checks when they know the funds aren't there. Whether or not the bank charges a fee, many merchants will charge a fee for bad checks and there may even be prosecution.


I remember times when I only have a couple of hundred dollars in the bank, but I don't remember ever writing a check that bounced or caused me extra fees.

The article mentions the possibility of timing issues ... a direct deposit may not credit when the customer thought it would and a check was presented for payment before the deposit credited. In those cases, banks are not always charging the fees, or will refund them. But still, I feel it's on the customer to not cut things so close. Even if you only keep a $100 margin, you would avoid the fee problem entirely. Yes, I know $100 can be a lot of money to some people. But if it was, I'd be double extra sure I didn't let it get sucked away by overdraft or NSF fees, let alone collections or legal fees.

But there also need to be protections for people with sudden, unexpected and unplanned for costs like storm or fire damage, accidents resulting in injuries, etc.

 

[allisolm]

Maybe it's just me, but maybe people shouldn't write checks when they know the funds aren't there.

People can be not bright enough for that. I have actually heard a person say to a bank teller that they could not possibly be overdrawn as they still had checks left. One person said they would just write a check to cover the amount they were overdrawn. Sad but true.

 

[Red Squirrel]

I like the way my bank is setup, if I overdraft it just goes negative, no fees, at midnight it will auto transfer money from the credit line to bring it to 0. I never have to worry about having enough money for a cheque, or bill etc.

 

[Lost_in_the_HTTP]

^^ But the people most affected don't have a credit line or other account to draw from.

 

[Captante]

My current primary checking account will not overdraw. If the funds are not there the payment will simply decline. As it should be.

The issue to me is that just like Wells-Fargo got caught doing years ago banks will "re-arrange" (read: play games with) the order in which payments are received and/or funds are cleared in order to maximize their overdraft-fees @ $35 a pop.

I think everyone has experienced the sinking feeling of a quick "$37 cup of coffee" ($2 coffee + OD $35 fee) at least once.



I strongly suggest either turning off "automatic" cash advances on the account you use for debit-transactions -OR- attaching a SMALL credit line (say $500) to it to cover them if possible.

 

[Red Squirrel]

Ouch $35 that's brutal. Yeah so glad my bank does not do that. My previous bank had overdraft fees but it was a percentage of the amount you went over by so while I did everything to avoid it, if it did happen it was not that bad.

 

[dank69]

Don't some banks offer an option to draw from a linked savings account if your checking doesn't have enough? That should be standard but Americans aren't exactly discerning consumers.

 

[Lost_in_the_HTTP]

They do IF you have a savings account, which many do not.

 

[balloonshark]

I made a simple math error in my checkbook that cost me over $100 in overdraft fees. That was back in the early 90's when fees weren't so crazy. I had to go to the bank and sit down with someone to find my error. I was not happy about $100 in fees when I just bounced a handful of checks.

I think my current bank has the option to either decline paying the check if funds are not available or can chose to have a 24 hour forgiveness period to put the funds in the bank. I think I opted for the former and got a weird look from the lady signing me up for the free checking account.

 

[Fenixgoon]

It's not even alway people writing bad checks on purpose.

I literally had BofA process all debit transactions before all credits, regardless of their actual transaction time in reality.
The result was an overdraft charge, even though I had money in my account to cover all charges at all points in time.

I called BofA to yell at them. I think they reversed the charge, but I don't do any business with them anymore.

 

[pete6032]

Big article here on them and their effects on banks and customers.

Bloomberg - Are you a robot?

Maybe it's just me, but maybe people shouldn't write checks when they know the funds aren't there. Whether or not the bank charges a fee, many merchants will charge a fee for bad checks and there may even be prosecution.


I remember times when I only have a couple of hundred dollars in the bank, but I don't remember ever writing a check that bounced or caused me extra fees.

The article mentions the possibility of timing issues ... a direct deposit may not credit when the customer thought it would and a check was presented for payment before the deposit credited. In those cases, banks are not always charging the fees, or will refund them. But still, I feel it's on the customer to not cut things so close. Even if you only keep a $100 margin, you would avoid the fee problem entirely. Yes, I know $100 can be a lot of money to some people. But if it was, I'd be double extra sure I didn't let it get sucked away by overdraft or NSF fees, let alone collections or legal fees.

But there also need to be protections for people with sudden, unexpected and unplanned for costs like storm or fire damage, accidents resulting in injuries, etc.

"I see you have overdraft fees. Have you tried not being poor?"

 

[nakedfrog]

It's not even alway people writing bad checks on purpose.

I literally had BofA process all debit transactions before all credits, regardless of their actual transaction time in reality.
The result was an overdraft charge, even though I had money in my account to cover all charges at all points in time.

I called BofA to yell at them. I think they reversed the charge, but I don't do any business with them anymore.

Similar story with me and US Bank ~20 years ago.

 

[sportage]

You have to watch out for "stacking". I think that's the term.
Now illegal, I think, maybe or maybe not. You never know about these banks.
Stacking... where you might have $500 in your account and checks coming in for $2, $4, $5, $10 and one for $500.
With "stacking", the bank pays the $500 check first and then pays the smaller checks, however those smaller checks cause an overdraft fee of oh say $35 for each of the smaller checks. Total fee, $140.

Now.... if the bank had paid the smaller checks first, where you had enough funds to cover the smaller checks, then the bank had paid that $500 check last, you'd only have one overdraft and only one overdraft fee. Total fee, $35 vs $140.

You gotta watch those crooks!!! You know, the crooks every taxpayer bailed out in 2008.

 

[Red Squirrel]

I made a simple math error in my checkbook that cost me over $100 in overdraft fees. That was back in the early 90's when fees weren't so crazy. I had to go to the bank and sit down with someone to find my error. I was not happy about $100 in fees when I just bounced a handful of checks.

I think my current bank has the option to either decline paying the check if funds are not available or can chose to have a 24 hour forgiveness period to put the funds in the bank. I think I opted for the former and got a weird look from the lady signing me up for the free checking account.

Oh man if there is one thing that is 100x better now than before, it's ability to do banking online. I remember my mom sitting down to balance the check book as a kid. I had no idea what that meant, but it looked like a lot of work and took a good part of the day and thought to myself "hopefully when I'm an adult there's an easier way". Glad there is. I just set everything on auto pay and it's pretty much set and forget. I login every couple days to check for any weird transactions and to just have a general idea of where I sit financially and that's about it.

 

[Lost_in_the_HTTP]

^^^ You can't really do that though. Too many instances of banks making mistakes in how much they draw or when or where they put things.

I had a CC that I set to take a set amount ... something like $75/mo towards a balance. The first month they took the whole amount due, something like $400 and when I called to gripe, they refused to refund it. 'We cannot redeposit the funds, we're not set up to do that, but we'll send you a check in 6-8 weeks.'

I had the funds in the other account with lots to spare, so it really wasn't an issue. But that could have easily caused a problem for many others.

 

[Red Squirrel]

In that case you lawyer up and sue the living crap out of them. If it's clearly their error then a good lawyer should be able to win the case. But at same time it should be everyone's responsibility to have a buffer such as a credit line to be able to handle stuff like that. They practically hand those out like candy, just need to ask.

 

[MtnMan]

NEVER bank at a FOR-PROFIT bank... fucking never

Credit Unions provide virtually every service as a 'for profit' bank, and for a whole lot less, a whole lot.

Just checked my CU site, and if you don't have overdraft protection, you still have 2 free days to cover the overdraft with a deposit or transfer, and on the 3rd day the charge is only $12.

My total fees for all my banking at my CU is $12 per year.

Credit Unions are easy to join now. It used to be you had to work for a specific company, or have immediate family that did, now there are several locally that only require residency is the counties they serve.

 

[Red Squirrel]

Maybe that's why my setup is better, I'm with a credit union (technically called a Caisse but I think it's exact same thing). I ditched the big bank years ago and never looked back. Used to be with RBC but they fired a bunch of people and replaced them with TFWs so a lot of people decided to boycott and move their accounts out and I did the same. Realizing that all the big banks most likely would do the same I decided to look into CUs instead.

When I got setup with the CU I basically went from having zero account with them to having mortgage transfered over, regular bank account, TFSA, credit line and credit card. There is a $5 membership fee and I did not have the cash on me at the time so I paid with it with the credit line that I literally just opened with them. Once I got setup with online banking etc I paid it back then started closing the accounts at the old bank. Also got a better rate on the mortgage and they paid a big chunk of the transfer fee.

The hardest part was having to get all my bills updated, that's a pain. But that has nothing to do with the bank. Basically same idea as having to change your address everywhere if you move. Some utilities want a fax or snail mail for that too. What is this, 1960? lol.

 

[MtnMan]

I moved to a CU long before online banking was a thing.

If the need arose to move to another CU today, that still would not be much of an issue. I actually trust the CU more than I trust any company from drafting from my accounts.

Companies that initiate withdrawing money from my accounts are few, and allowed by me only because it's really the only option, or it saves me money. Example, allowing drafting from my checking for my cell phones saves me $5 per phone, or $20/month, $240/year.

Otherwise, I use bill pay to pay these people. When the monthly bill is the same, it's automatic every month. For those that vary from month to month, I schedule the bill pay as soon as I receive the bill, which today is all electronic. I also use Quicken, which will alert me when stuff is due. Recently the local water dept had a glitch and e-bills were never sent, but Quicken alerted me I should have a bill to pay.

I also get an SMS message for every deposit/withdrawal, plus CC charges. That recently showed my CC had been compromised, but I alerted the CU withing 10 minutes. I will get a notification on my phone often before I put the card back in my wallet when I'm at the checkout at a store, or at an ATM.

 

[Lost_in_the_HTTP]

^^^ I do pretty much all of that.

But I also use rewards CCs whenever possible even for utility bills rather than paying directly out of a bank account. Have earned a couple of hundred dollars in rewards/bonuses that way over the years.

Plus it's a layer of insulation between the utility and the bank account.

 

[MtnMan]

^^^ I do pretty much all of that.

But I also use rewards CCs whenever possible even for utility bills rather than paying directly out of a bank account. Have earned a couple of hundred dollars in rewards/bonuses that way over the years.

Plus it's a layer of insulation between the utility and the bank account.

I get a $5/line discount for direct pay on my cell phones (4-lines x $5 = $240 a year), but only for checking draft, or debit card payment, and not for CC payments. They don't want to pay the VISA/MC fee, I guess.

 

[Captante]

^^^ I do pretty much all of that.

But I also use rewards CCs whenever possible even for utility bills rather than paying directly out of a bank account. Have earned a couple of hundred dollars in rewards/bonuses that way over the years.

Plus it's a layer of insulation between the utility and the bank account.

Try not to use SMS for 2-step verification ... it's not secure.

The most commonly used "authenticator" app is (of course) Google but there are multiple free/cheap and secure other options.

 

[brianmanahan]

You have to watch out for "stacking". I think that's the term.
Now illegal, I think, maybe or maybe not. You never know about these banks.
Stacking... where you might have $500 in your account and checks coming in for $2, $4, $5, $10 and one for $500.

lol i know a guy who worked on a project like that at one of his past jobs 20 or 30 years ago

he said he had to change transaction processing to be sorted by amount descending instead of time ascending to hit people with as many overdraft fees as possible

 

[brianmanahan]

i've never run into overdraft fees

haven't kept less than 5k in my checking since probably 15 years ago, so maybe that's why

 

[Captante]

i've never run into overdraft fees

When you have multiple checking accounts some of which are intentionally left at/close to zero balance for reasons like being used with Paypal it can happen. (especially when many banks turn the "auto-pay overdrafts" feature on checking accounts on by default)