So, our Government recently passed legislation around bank fees, specifically insufficient funds fees for ATM and Debit card transactions.
From cnn.com:
The Federal Reserve on Thursday released a new rule to prohibit banks from automatically enrolling customers in overdraft protection programs, which charge fees when consumers spend more than they have.
Starting on July 1, 2010, all banks will have to ask their customers to opt in to overdraft protection plans for ATM and most debit card transactions.
Some banks charge as much as $39 when customers overdraw their bank account by even a few dollars.
I can’t help but wonder … Why was this legislation even necessary?
The only time you’re charged an insufficient funds fee is when you spend more money than you had in your account. It seems like the Government had to step in to stop banks from charging these fees because we the people are incapable of simple, second grade arithmetic.
If you had $100 in your checking account, you can’t go and spend $101. That would put your balance below $0. One would think that the banks would simply deny the debit at the point of sale, but usually they let the debit that will cause an overdraft go through and then charge the customer a large fee.
But really, it doesn’t matter what the fee is. If people would just keep better records and pay attention to their life and know how much money they really have, this would be a non-issue.
I won’t lie … I’m 30 and I think I’ve overdrawn my checking account 3 times so far in my life. Twice was when I first got a checking account, 14 years ago, and was young and irresponsible and didn’t understand the importance of keeping good records. The most recent time was earlier this year and it was a total record keeping mistake on my part.
I mean, am I wrong on this? Why is this even an issue? It’s up to you to know your balance and know what checks and debits you have outstanding. After all, it is your money.
November 23rd, 2009 at 10:19 pm
ha. we were just talking about this like a week ago
December 11th, 2009 at 1:41 pm
I tend to agree with you on running a balance, but at issue is the WAY they process charges, putting a large payment through first, then maximizing the overdraft fees on smaller more numerous charges. They do this intentionally, they hold payments for up to 3 weeks waiting for the opportunity to cause maximum damage. For many, they don’t realize the mistake and compound it by continuing to use their card until they have racked up hundreds of dollars in late fees and finance charges. They then jack up the rates on cards etc based on your overdraft activity. YES legislation is necessary. So are class action lawsuits. I personally hope Chase gets the shit sued out of them.
December 11th, 2009 at 3:02 pm
I agree with you that something needs to be done about the order bank process debits. They should be processed in time order (the time they occurred) not by largest amount to smallest amount.
But, most people don’t see this legislation that way. Most people see this legislation as OMG BANKS HAVE THE NERVE TO CHARGE ME WHEN I OVERSPEND!
If people didn’t send more money than what they have in their accounts, the order that Chase processes the debits in is irrelevant.
I will be the first to agree Chase is an evil, evil corporation.
But, I stand by my assertion that simple, second grade arithmetic would make this problem a moot point for the vast majority of people.
If you had $100 in your account and you spent $99.99 over 5 transactions, it wouldn’t matter what order Chase processed those transactions in. If you spent $100.01, then it would matter. But, those mistakes happen to frequently. And because people are too lazy? stupid? indifferent to? keeping an accurate check register, they moan about the high bank fees.
I think you and I are certainly on the same page because we understand the issue.
Most people don’t understand it.
December 18th, 2009 at 4:34 pm
Processing used to be for only posted transactions only. Regardless of pending items. Now it’s all lumped into one and you can have multiple fees based on transactions that haven’t even processed yet. Card purchases should be handled the same as a check. Imagine if checks showed up pending for two or three days on your account? People would be ticked!
December 29th, 2009 at 8:44 pm
Yeh..you are 30..wait to you have a family and have to pay dyacare as well as robbing Peter tp pay Paul…then maybe you will see how hard it is not to over-drtaft!! It’s a game that the banks are profiting richly from..I asm not against them charging fees for my mistake but $39 per over-draft is rediculuos!!!
December 29th, 2009 at 9:32 pm
Frank:
Just because I’m 30, you assume I don’t have children or a family?
FYI … I am married – have been since I’m 27. I have a child with more coming soon. I work full time. I have a mortgage and a car payment, just like you probably. If you’re robbing Peter to pay Paul, your finances are out of control.
December 31st, 2009 at 6:26 am
Very interesting and I agree with both sides. It is the account holder’s responsibility to know their accounts adjusted balance. IMO though transaction posting time is what needs to be governed. Very often we have $1.00 pre-auths posting for multiple transactions for up to 10 days. With today’s technology a bank can monitor direct deposits vs average daily balance vs transactions. This long pre-authorization pending game is where the problem is and banks know it. Humans forget & banks use it in their favor on purpose.
We live in (or soon will) a cashless society were the majority of financial transactions occur digitally and rather fast. IMO pending transactions should be finalized by the end of business of the third day in date/time order.
January 5th, 2010 at 9:57 pm
Whoever wrote the original post has no idea what they are talking about. The new regulations are designed to curb excessive fees, not eliminate a banks ability to collect on delinquent accounts. The way the system works presently, banks have been given a license to steal. Can’t you feel their hands in your pockets?
There are several ways banks are currently mugging their customers, to wit…
Banks use deceptive practices such as processing larger transactions ahead of smaller ones, regardless of chronological occurrence. Say for example you have $100 in your account. You spend $1 at a coffee shop, $5 at a gas station, and then $100 at the grocery store after the fact. Banks currently deduct the $100 grocery bill, then the smaller transactions (which chronologically occurred first) so they can charge two overdraft fees instead of one. This underhanded, predatory practice is quite literally a license to steal and must be curbed.
Bank fees are also well in excess of the amount over-drafted. Using the same scenario as above, the total amount of the overdrafts is $6 spread out over two transactions. The national average for overdraft fees is $27, with some banks charging as little as $10 per overdraft, and other institutions charging as high as $35. So the poor sap that over-drafted twice could be faced with upwards of $70 in fees for going $6 into the negative. That’s like a life sentence for stealing a loaf of bread.
Furthermore, banks often enroll customers into their ‘overdraft protection’ programs when they sign up for an account. No opportunity to opt out is given, unless the customer is incredibly bank savvy and reads the fine print. I did, many don’t. These programs allow overspending, and will cause point of sale transactions that place an account below zero to occur instead of rejecting the card. This is where the majority of overdraft fees occur. Between 1999 and 2009, the Federal Reserve reported that the total amount of overdraft fees collected jumped from $18 billion to $38 billion per year.
The new regulations that become law on 1st July, 2010 are intended to prevent these shady practices. Until they go into effect, banks are literally putting the pedal to the metal and hitting every customer with as many fees as possible so 2010 won’t be a total disaster for them.
January 6th, 2010 at 7:33 pm
“Say for example you have $100 in your account. You spend $1 at a coffee shop, $5 at a gas station, and then $100 at the grocery store after the fact.”
Therein lies the problem … If you only have $100 in your account, why are you spending $106?
It’s not the banks … it’s the people spending more money than what they have in their accounts.
Please don’t misunderstand me … Banks are, by nature, evil institutions. You’ll get no argument from me. And, the bigger they are (JP Morgan, BOA, Wells, etc.), the more evil they are.
But, I stand by my statement. When you don’t spend more than what is in your account, the order in which banks process transactions, the amount of their insufficient funds fees and their overdraft protection policies are completely irrelevant.
January 20th, 2010 at 11:40 pm
The point is not about keeping track of their account. It is about the unethical trickery that banks use to hurt people, especially in this economy.
There are many factors that can result in someone not keeping track of their account properly. First though, until 3 months ago, my bank would let my transactions bounce…and that was fine with me. They snuck in the NSF without informing anyone.
Now what factors could effect someone keeping track of their account properly. Stress from various issues: divorce, unemployment, illness, foreclosure, etc. Factors that I am personally dealing with.
Just that person before was wrong for assuming that you were unmarried and had no children, don’t make the same mistake and assume that there are not circumstances that would affect an individual from properly monitoring their account.
God Bless,
GJ
February 3rd, 2010 at 1:36 am
cybercjh: By that logic, They should be allowed to charge $1000 for a $1 overdraft. Where do they/you draw the line?
February 11th, 2010 at 1:00 pm
my problem is Huntington does not give you a choice. They make every one of their customers take overdraft protection. I have overdrafted once in 5yrs since being with them. It was an accident where I got lazy and didn’t keep my book straight. It was $7 over, I recieved a odf for $37.50 that put my total at $44.50. Then recieved a $15 fee for using non huntington atm’s. They charged me that fee which in turn charged me another $37.50. So not I am neg. $97. I didnt know it so didn’t put money into my account. I then recieved a $7 a day extended overdraft fee the day after I went into overdraft. And after a week I recieved a $35 fee for having overdraft for a week. So adding the extra $35 for 7 days of overdraft and $35 for it being a week there was $70 added on top of it all. My account ended up $167 in the negative after a week of over drawing it $7. To me $160 in fees for overdraft of less than $10 is too much and needs taken care of!
February 17th, 2010 at 12:29 pm
US bank is the same way they will sit on your deposit , but u can bet the when you use your debeit card they come out not more than minute later i timed them 1 time. US bank is very good at shuffling around with draws..i cant wait untill june
February 22nd, 2010 at 12:14 am
When we banked through US Bank they hold CASH deposits for several days then do the scam of processing the highest deduction first so a few times we got burned pretty bad because they didn’t process our deposit until they pretty much emptied our checking. They also held a few check payments longer than normal and burned us that way. We no longer bank with US Bank for that very reason. There were several other shady practices that they did to steal our money. Sure if I overspend I deserve to be penalized but not because of your shady policies.
March 8th, 2010 at 10:19 pm
If you are not wanting to see more bank control, you either work for a bank or have no experience with them. I have owned and run my business for 26 years now and can tell you, there is nothing good about a bank, we will be working to get away from them as soon as possible. We never make mistakes but are constantly robbed, overdaft fee’s and the banks are never on you side. They simpy have a license to steal, and help otherss steal from you, you are simply a fool they prey upon. Wise up … we did! Next time someone looses a check or says they didn’t receive it, look at the stop payment rules and overdraft fee’s, try to get the bank to defend your money from scammers and cons, they make tons of dough, just leeting folks get at your money. How can they loose? and how cna you win. Only way to win is not to play.
March 9th, 2010 at 9:21 pm
In response to: “But, I stand by my statement. When you don’t spend more than what is in your account, the order in which banks process transactions, the amount of their insufficient funds fees and their overdraft protection policies are completely irrelevant.”
I’m sorry but you are incorrect. BOA does not keep track of your spending at all if you have $100 and spend $20 and $30 that by debit card that day your account says you have $50 at the end of the day but then the next day BOA says you have $100 available balance because the pending debit card transactions from the day before drop off. Then say today you spend $80 in cash withdrawral because you thought you had $100 in your account. Then spend nothing for 3 days but then 3-5 days later those $20 and $30 transaction hit the account the $30 one 1st even though it was the second transaction in the day now you have 2 overdraft fees 1. beacuse the bank did not displaqy you available balance properly as the pending charge by law are supposed to remain pending on your account for at least 3 days making the available balance remain at $50 the day after up until 3 days later and 2. the charge you because they re-orgered a transaction to make you overdraft.
Now in this simple example you should beable to remember you made 2 tranasaction yesterday for $50 total but when you make 5-10 swipes of you card every day for small amounts you expect the back to keep a proper leger balance (what has cleared) and a proper available balance that takes into account all the pending transactions as well as the ones that have cleared except for the checks you have written that havent posted yet as obviously the bank does not know you have written them.
March 10th, 2010 at 10:21 am
I stand by my statement. When you don’t spend more than what is in your account, the order in which banks process transactions, the amount of their insufficient funds fees and their overdraft protection policies are completely irrelevant.
It’s not up to the bank to tell you how much is in your account. It is your responsibility as a customer to keep a ledger showing you how much is in your account and to not spend more than that.
Some transactions take a day to post. Some take 2. Some take 3. Some take longer. So, what the bank reports as your ‘available balance’ is the money they know you’ve already spent. If a transaction you made 2 days ago hasn’t posted to the bank yet, then they don’t know about it.
People interpreted the introduction of online banking as their ticket to slack off and stop keeping their own register. Well, they do so at their own peril.
If you have $100 in your checking account and you spend $101, you will be charged NSF fees. If you have $100 in your checking account and spend $100 or less, you will not. It’s really just as simple as that.
People need to start taking responsibility for their own finances.
Waaahhhhhhhhhhhhhhhhh … I spent more money than I really had, now the bank charged me a fee. Waaahhhhhhhhhhhhhhhhhh. G. M. A. F. B.
March 31st, 2010 at 9:04 am
No one is perfect. Everyone makes mistakes and sometimes more than once. I still does no give Bank of America the right to minipulate the numbers so they can maximize their profits. I have used my debit card and the money was taken out with the debit card. The next thing I know something else comes in like a automatic payment and that payment is more than my debit so the debit and anything else I did comes back and the fees start to rack up. I have even checked my account at an ATM. Needed something at the store and took some cash out of my account. It was there then for me to take it but a larger amount came in from somewhere and they actually bounced my cash withdrawl. The money was there at the time I took out. How can you charge a fee for money that was there and you gave it to me when I asked for it then go back and say oh no this needs to come out first because it is a larger amount. Guess what, that wasn’t there either so I was wacked twice with the fee instead of once. I have been charged $35.00 for a $2.76 debit at Dunken Donuts because of this practice. And the money was there for the coffee when I bought it. They are doing this intentionally to make money. There should be a law against reconstructing someone’s account to charge these fees. Transactions should be left in the order they come in and not moved around by the bank so they can make more money for their bonus at the end of the year. This is robbery. There is a law against that. I contacted an attorney today. This is going to end. PS: this is happening to people that are not making a lot of money to begin with and are struggling to get by from week to week. The people who say there schould be no need for this to change have thousands of dollars in their checking and savings accounts. It does not affect them. What is that saying? The rich get richer and poor get poorer. Why is that? I’ll tell you why. They are being robbed. Where is “ROBIN HOOD” when you need him?
April 1st, 2010 at 11:52 am
I stand by my statement. When you don’t spend more than what is in your account, the order in which banks process transactions, the amount of their insufficient funds fees and their overdraft protection policies are completely irrelevant.
April 11th, 2010 at 1:06 am
I think cybercjh will change his tune when an automatic draft is submitted ahead of schedule, or he (or his wife) forget about a $4 coffee they bought with a card, or his family’s income is reduced by unexpected or tragic circumstances. Just for the record, everyone who overdraws is not a lazy, financially incompetent whiner. Some of us are just human and make a mistake on occasion.
Does anyone else recall back in the 1980s when debit cards came into existence the bank rep boasting that you should get one and it won’t be a problem, sensing your apprehension, because “THE CARD WON’T ALLOW YOU TO SPEND MORE THAN YOU HAVE IN YOUR ACCOUNT”? I’m just saying, that was the biggest load of ….and a $38 billion bait and switch if ever I saw one.
April 11th, 2010 at 8:34 pm
Hi Nudawn,
Thanks for your comment. I’d like to reply:
“…when an automatic draft is submitted ahead of schedule…”
I don’t sign up for automatic drafts for any of my bills. I pay them one by one as they come due. To me, this system keeps me in control of my finances.
“…forget about a $4 coffee they bought with a card…”
If my finances are that tight that a $4 cup of coffee will push my account balance below zero, something is tragically wrong with my decision to purchase that cup of coffee.
“…family’s income is reduced by unexpected or tragic circumstances…”
Proper planning and a good savings will mitigate most of these circumstances. But, I do agree with you on this point – you can’t plan for everything, no matter how hard you try.
“…everyone who overdraws is not a lazy, financially incompetent whiner…”
I tend to agree with you on this point most of the time. A one off mistake doesn’t make you stupid, even if you do it a few times a year. We’re all busy and human, I understand that. But, the people who are overdrawing their account over and over and over again and paying hundreds or maybe even thousands of dollars in NSF fees to their bank every year because of their mismanagement of their finances … in that case, they are a lazy, financially incompetent whiner AND a moron.
May 14th, 2010 at 6:48 pm
“It’s not up to the bank to tell you how much is in your account.”
REALLY? From my smartphone I log into my account to tell me how much is in my account. My bank is my ledger, not me. My account website says I have 100.00, that means I can spend approx 80.00.
The banks arguement that there are additional charges against the 100.00 in my account are ridiculous. They don’t “post to your account” until Monday morning. Laughable.
Do they shut down the servers over the weekend? Are the banks IT department that “dummed down” that they can’t write the programs to handle real time processing?
“It’s up to you to know your balance and know what checks and debits you have outstanding”
No, that’s my banks job. I wasn’t good in math.
This is a column on NSF fees. If you have only had 1 NSF fee in your whole life, why would you even comment on this post?
May 17th, 2010 at 8:49 am
Hi theadambomb.
“No, that’s my banks job. I wasn’t good in math.”
Pathetic. No, it’s not your bank’s job. Your bank is a clearinghouse to process deposits and debits.
Example:
1/1/10: DEPOSIT $100.
Now, you have $100 in your account. And, your bank shows AVAILABLE BALANCE: $100.
1/5/10: YOU WRITE A CHECK FOR $50.
Your bank is still going to show AVAILABLE BALANCE $100, but your own personal check register should now show $50. The bank doesn’t know you wrote that check (yet). Your bank doesn’t have ESP.
1/10/10: YOU MAKE A DEBIT CARD PURCHASE OF $25.
Your bank will now show an AVAILABLE BALANCE $75. But really, you only have $25 left because, still, the bank doesn’t know anything about that $50 check you wrote.
1/15/10: YOU MAKE A DEBIT CARD PURCHASE OF $40.
Now, your bank shows an AVAILABLE BALANCE $35. But really, you’re $15 in the hole because of that outstanding check.
1/20/10: YOUR $50 CHECK IS CASHED.
Now, the bank shows AVAILABLE BALANCE -$15 and hits you with an NSF fee because you over spent.
How is this your bank’s fault? This is poor record keeping on your part.
If you’re that bad in math and unable to keep your own check register, then really it should be your ACCOUNTANT’S job to keep track of the checks you write and debits you’ve made.
Alternatively, stop using banks altogether and go back to cash-only.
Suggested reading: Self Reliance by Emerson.
“This is a column on NSF fees. If you have only had 1 NSF fee in your whole life, why would you even comment on this post?”
It’s my blog, buddy. I wrote the post and I have been commenting on other comments left by readers, such as yourself.
June 10th, 2010 at 9:35 pm
when atm was created way back when, you could not spend more than you had in your account, NOW when a person accidently OVERLOOKED there balance and tries to swipe the CARD, the bank lets the charge go through even if it will make your negative. THAT”S NOT RIGHT>>>the banks should be there to safe gaurd your money, i thought that was the reason banks where invented. WHAT HAPPENED??????
June 10th, 2010 at 9:46 pm
we all know know one is perfect, banks should not be allowed to capitalize on that, I know is kind of redundant to complain about capitalism living in a capitalistic society, but if it is allowed for them, why cant i start making up fees and charging poeple, lets say like charging the bank just to hold my money, since they use the volume of cash on hand to make buisness finance plans must be nice maybe i dsould get into banking
July 31st, 2010 at 6:45 pm
The legislation is in place to stop banks from exploiting people who overdraft their accounts. Many people are automatically enrolled into the overdraft protection program without knowing/realizing it. Yes it is the persons fault for poor record keeping but the banks exploit this by processing the larger transactions first, then the smaller transaction. Because of this practice what could have resulted in one NSF on an account could result in three, four, five, etc. Exploiting people like this is no ok.