A recent accounting error resulted in my checking account being overdrawn by $250 and me being charged $245 in overdraft fees as a result. Here’s why.
Large to Small Transaction Processing
Many banks these days, in an effort to extract as much money as humanly possible from their customers, have begun processing checking account transactions in order of largest to smallest. This is why I ended up being charged $245 in overdraft fees for what should have amounted to one overdrawn transaction.
In my case, several transactions cleared on the “big fee day” as I refer to it now. At the time I had about $1500 in that particular account. The largest transaction to clear that day was a check I wrote of $1,400. There were 8 other transactions to go through that day, the total of all of these adding up to $350. One of these transactions was a car payment of about $300; the remaining $50 in transactions were small purchases like a pack of gum, a Starbucks stop, etc.
So, had my bank processed my transactions in order of smallest to largest, the $350 in smaller transactions would have cleared just fine and I would have only been popped with one overdraft charge. Instead, they cleared the $1,400 check first, then the $300 car payment overdrew my account, resulting in the first $35 charge, followed immediately thereafter by 6 more small transactions and six more overdraft charges of $35 each!
Just because of the way the bank chose to process my transactions I paid seven overdraft charges totaling $245. Had the bank processed the transactions in the reverse order, the first seven transactions would have cleared just fine, with the $1,400 check being the only overdraft.
So, $245 vs. $35 just because of the way the bank chooses to process transactions? That’s a scam if I ever heard one. And don’t think the bank has any excuse for this either…trust me, I asked.
Bank’s Excuse #1
When I called to object to such a ridiculous system I was told that the bank did a study and the customers prefer to have transactions processed from largest to smallest. When I asked why or for any information at all about that study, the customer service rep didn’t have an answer, neither did her supervisor, and apparently nobody does because they told me they’d have someone to call and follow up with me…no one ever called.
Bank’s Excuse #2
When I pushed a bit more, I was told that processing transactions from largest to smallest ensures that the important bills get paid…the bank is assuming your most important bills are probably the largest. Ok, fair answer at first glance, but wait…every single one of my transactions were paid, including the $1,400 check that overdrew my account. When I brought this up, the supervisor said, “well, sometimes they won’t all get paid.” When pushed, she had no real answer to when those “sometimes” were.
Bank’s Excuse #3
After about 20 minutes on the phone and a handful of questions but no answers, I requested that the order of my transaction processing be changed. No can do, I was told, apparently the bank does not have the ability to change the order of the transactions.
So It All Boils Down to This…
Ok, so let’s make sure I’m clear on this.
- Transactions are processed in a way that will always result in the most fees for the bank.
- Someone, at one point in time, studied some customers and found that they wanted their transactions processed from largest to smallest, but the actual location or means by which someone can get a copy of this study is completely unknown.
- The bank processes transactions from largest to smallest to ensure that the largest, and presumably, most important payments actually clear, but all transactions cleared so that doesn’t make any sense.
- The bank is incapable of changing the order of transaction processing for its customers and they have no idea why that is.
Ok, I think I’ve got it now. By the way, the bank was Fifth Third.
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18 responses so far ↓
1 Dan Mahoney // Jan 13, 2009 at 2:31 pm
I had posted about something like this in my Livejournal, and a bot of some sort spammed me, and told me that there was a law on the books that would change this (I think that this was a few years ago).
Nice to know that folks like you and I are enabling them to loan out money to people who can’t pay it back.
2 Mark Gustafson // Jan 17, 2009 at 4:07 pm
Here is one for you done to me this week by Wells Fargo where I have been a customer for over 7 years. I returned home from outside the country to find that my entire bank account at this institution had been taken out by their “Legal Department” and given to the state of California (of which I have never lived or resided and am not a resident of) because of a request by them for all my account funds. It involves a three year old “sale tax action” which they say I owe and I say I do not. But this is beside the point. The account is not even in the state of California. On top of that Wells Fargo advanced funds into this account from my linked Visa account, to be given to the state again the next day, and so on till the state was satisfied with the amount. Beware of your linked accounts at institutions, and realize that money that you give to Well Fargo Bank for “safekeeping” is anything but that. I have yet to see anything in writing from either party regarding this “theft”. I did arrive back intime to notice this going on and closed the account immediately but not before the first cycle from my linked Visa account had occured. I am disputing this, but I am just a small cog in a big wheel and will just end up having a credit score of 800 go to “how low can you go” over this . Beware once your funds enter a bank they are no longer yours.
Mark Gustafson
3 John Crenshaw // Jan 19, 2009 at 6:51 am
Wow Mark, that’s a crazy situation. I can’t believe they’d draw funds from a linked card over and above what they took from your checking account…and why California?
I really hope you get things worked out…that’s a really frustrating situation I’m sure.
4 Rodger Alford // Mar 10, 2009 at 11:29 pm
The State of NY sought to get $50,000 in taxes (was actually $17,000 before interest and penalties) out of a Bank of America account that had a couple hundred in it. The bank the charged me over a hundred dollar in a fee which they showed me is in my. Terms and conditions for not having the money the State wanted. Fortunately I did not have the $5000 connected Visa account I now have or they would have gotten that, too. After reading above post I will now close Visa acct ASAP! Thanx.
5 Emily // Mar 14, 2009 at 10:15 am
I was scammed over Craiglist and bc the money orders of course did not clear, PNC bank took money out of my linked account!! Which was never mentioned to me… Now, instead of taking money out of my checking account, which had enough money bc I just transferred more money into it, they took money out of my savings, KNOWING THAT IT WOULD FALL BELOW THE LIMIT. Now I will be charged with fees for that when they could have taken money out of my checking account. Any advice?
6 Terrance // Apr 5, 2009 at 11:49 am
I was in Bank of America this week. I sat and discussed two overdraft fees with a lady there. They agreed to refund one of the two $25 “NSF (non sufficient funds) fees” they charged me. One of the fees was for going in the negative a few bucks from a purchase at Starbucks. The second for a small purchase at a gas station. Ok, after a half an hour of my time wasted, I got $25 back after they reversed one NSF fee… and I made sure I had plenty of money in my account to ensure my account would stay in the positive. I had also completely stopped using my bank card the day before. Everything seemed fine after I was done speaking with the banker. THEN the Next day I checked my balance and I had 3 More Charges of $35 in NSF Fees. I raced back to the bank knowing that this must be a bank error, since I had not used my card at all. Nope… the lady told me that since additional charges posted to the account (from two days before), that there were additional NSF Fees coming my way… even though I had already brought my account positive. In fact, the charges were now $35 each instead of $25 because it was a “second day” of charges that didn’t previously have funds (or supposedly wouldn’t have had funds). OK, so now I got 3 more $35 charges, even thought I hadn’t used my card since last talking to the SAME woman at the bank. I demanded my money back from Bank of America. The manager walked over and agreed to waive one of the $35 fees (gee thanks!). Now I know why banks made over 37 BILLION dollars last year by ripping of their customers. I will be CLOSING my account with Bank Of America as they are unethical in their practices, and that is simply unacceptable for me. In my own opinion, any person using this bank, or any other bank like this should cancel their account immediately. I propose a “Closure Day” or “Walk Away Day”. Let’s all get “closure” and “walk away” from our banks by lining up to pull out our money, and closing our accounts with them…. and ALWAYS complain and demand your money if any bank ever rips you off. Be loud, and let the other customers hear you say “This Bank Is Unethical and I want my money back”.
Disclaimer: I am not against NSF fees altogether. A $5 or even $7 NSF fee charged in a fair way would be acceptable. This would be a slap on the wrist for the customer, and the bank would still profit. BUT $35 is insane (per transaction.. what the heck?).
Advice:
- Find a good credit union instead.
- Never use a bank card connected to a checking account to make purchases (use a credit card that will not go in the negative, like a Paypal card).
- Do not use Bank Of America, Chase Bank, or any other bank that is unethical.
37 Billion Dollars in NSF Fees earned in ONE YEAR? And what are they doing with that money they stole from their customers?
I am looking forward to walking back in there and cancelling BOTH of my Business Accounts at Bank Of America. I will also be closing 2 personal checking accounts. AND a savings account there. In addition, I won’t ever be going to them for a loan, or mortgage ever again.
Well, it looks like in the long run Bank Of America will lose because I would have been a life long customer (I had already been at the same bank for 9 years). Good Riddance.
7 Jennifer // Apr 21, 2009 at 9:09 pm
I had to laugh when I found this website, only because most of these stories are directly similiar to what has happened to myself over the past year. My husband and I have an account at Citizens bank and a credit union. Last year we started utilizing Citizens Bank by depositing r paychecks into this account and paying our bills, but we always seem to overdraft our account. They always took the largest check first and so on, we ended up switching back to utilizing the credit union the beginning of this year. The Citizens Bank would not stop a transaction that I did not authorize on day from my account, to me that was the last straw, well that and the $2.00 fee that would be charged if you did not have a deposit slip at the drive thru window. (Regardless if you we out of checks and had new ones ordered)
My friend was just telling me at Monday night darts that Hunnington Bank does the same thing.
Who and what stops this kind of unethical behavior? I am all for JUST SAY NO TO BANKS and GOT CREDIT UNION?
8 Beth // Apr 24, 2009 at 10:01 pm
BINGO!! My husband went to Georgetown Savings Bank on April 21 and asked if we owed on our overdraft (comes with getting paid every other week and incurring lotsa fees in the past). The teller told him it’s $90 and that if he paid that amount, it is paid in full. Then my husband deposited $400 in cash and the following day his check went in. Well, on April 23rd, I get a naughty notice in the mail from the bank with fees for insufficient funds saying that on April 20th we went 300 plus into the overdraft. Hmm, on the 21st you said 90 and we paid it, now more posted for the day before my husband went to the bank? Curiouser and curiouser. Seems that all our checks and atm charges come out STAT, but we can’t know about them stat, no..we get to know much much later when the transactions are backdated to scam us out of our money. Closing that account after twenty years. Sad
9 phil // Apr 29, 2009 at 4:19 pm
to terrence and other bank of america victims. i was negative 103 today at 5 pm when i went to the bank. all my own doing, plus 2 35 dollar fees for overdrawing. i got one refunded and my account was negative 68 dollars. i just went and put 80 dollars in and my account is negative 53. i looked online and my statement has -103.45 as my balance, has my 80 dollar deposit and a -23.45 balance, my 35 dollar credit for the one fee they knocked off, a positive balance of 11.55, and then after that 2 more -35 overdraft fees above my positive balance putting my back in negative, as if they were transactions i made. wells fargo did this to me, and when i called, they tried the same shit, they were posted in days before, all excuses YOU have all gotten,and then actually changed my online documents to reflect it. this time however, i have all documents saved and ready to print, and i await tomorrow for them to change them to make it look like they were posted in previous days, and that i never had a positive balance, bcz thats what wells fargo did. and when they do, i will save and print those too, and i will look into my legal options. if anyone wants to get involved, has proof of misdoing like i do, or wants to help, feel free to post or message me, im tired of this scam that it seems ALL banks are pulling now
10 Robert // Apr 30, 2009 at 6:17 am
4/30/2009 BOA
Just happend to me Today. $300+ dollars in overdraft. Over drew on saturday. Put a hundered in my account. Thinking to save some money i buy the cheap chilli fries, and the value burger for 2.50. Turned into a 37.50 burger, and 37.50 fries. Remember they do it for you so that if your at the store you wont overdraw and be imbarrased. If i would have known this crap i would have gone to walmart and had 1 overdraft fee instead of 11.
What happend to your out of money, declined?
11 Raji Rajan // May 6, 2009 at 6:24 am
We used own a restaurant and had accounts with Bank of America. As we had many deposits and withdrawals in a day, we were charged with all the fees indicated above. I have paid atleast $3000 just in overdraft fees as they wouldn’t change the order in which the checks get cleared. The sad part is we have paid $70 in fees for $100 checks, which is ridiculous. Why isn’t the government interfering in this. I even told them they are the biggest ‘Thieves”, no response. Inspite of all these fees, they still get billions of dollars in bailout.
I lost my business and took $700k writeoff. Nobody to bail me out……
12 Jeff // May 8, 2009 at 8:43 am
Banks… I can’t believe what they get away with I recently had a similar issue with sovereign you can read about it on my website.
here’s the direct link – http://www.scamresearchcenter.com/post/Bank-scams.aspx
13 Kay // May 19, 2009 at 2:10 pm
Wells Fargo does this scam, US Bank, Washington Mutual, and Bank Of America!!!!!The only place I can trust to keep my money is Boeing Employees Credit Union! When I am overdrafted, I have 24 hours to return my account to a positive if not longer before I am charged a small overdraft fee. I was overdrafted $800.00 due to a cancelled payroll check, I called B.E.C.U. and they told me they understand and it is unlike me to have an overdraft. NO fees. I will never use a Bank again!
14 Kay // May 19, 2009 at 2:33 pm
Where would these Banks be without us. Ah, how sweet it would be if we all stopped using Banks all together. Would their morals return like back in the day when they had to earn our trust? I’m not using Banks anymore. Not sure about the rest of you but due to this financial crisis I can’t afford to just unwillingly throw hundreds away to my Bank. These days they are taking our grocery money! With no mercy.
15 Kay // May 19, 2009 at 2:41 pm
Us Bank: I was a single mom on my own without choice. After a year of struggling my 9 month old and I got our own apartment. No furniture, plastic dishes, one pan and a low paying job. I wrote a check for a deposit of 75$. I ended up having to buy diapers and food. Told my landlord it would bounce and she said it was okay, she understood. That night she brought me 6 bags of food while my baby and I ate ramen for dinner. It didn’t bounce. Us Bank put it through. I went in with my baby and spoke to a manager. He said they would freeze my account and stop with the overdraft charges that would accur until I got paid. They didn’t. Nor did they honor what he had told me because he was NEW! 270$Later, I had to let it fall on my credit report and plague me.
There is no limit to what a Bank will do to their customers, ALL their customers.
16 Rodger Alford // May 21, 2009 at 10:06 am
Remember, also, if you have a connected savings acct [as I do @ B of A] which is intended to cover over drafts there is still a $10 fee if you dare to use it. And the funds are taken out in $100 increments. O/d for 10c and $110 is taken out of savings. I pay daily attention to my checking, savings and c/c accts with B of A but they still manage to get a good amount of $ in fees thru delayed charging, atm fees (I’ll find a 99c atm and get charged $3.50 by the bank) or them putting through a transaction scant hours before my direct deposit gets creditted at 2am on Friday. I’ve already written them that I will close all but the credit card acct at month’s end (only because I’m already going to be charged this month’s fee). Be careful not to leave a zero balance, close the acct and then have a fee pop up as an overdraft on fee day. You may also not want to close a credit card if it will be detrimental to your credit report (debt to available credit ratio, or oldest card history). They’ve got us by the short-hairs as we’ve been sold into slavery by Congress.
17 Ena Hull // May 24, 2009 at 8:28 am
I just had $235 charged to me in overdraft fees. BofA ran the larger check through first even though the check was numerically later. this triggerd a domino effect when really I should have only had one NSF fee. Those CROOKS!Isn’t there anyway as consumers that we can stop this unethical RIP-OFF!! This is criminal. There needs to be a class-action lawsuit against these types of banking policies. Where’s Andrew Cuomo when you need him. After all this bailout money, these banks need to stop stealing from hardworking people. There needs to be a national law that limits NSF fees and how a banks can run larger amounts first before the smaller ones. This is WRONG and is stealing!!!
18 Kathy // Jun 1, 2009 at 5:06 pm
Add Wachovia to the list. My business account incurred $900 worth of charges because of this in May.
The straw that broke the camel’s back was today when they refused to cash my husband’s US Treasury check because there wasn’t enough in the account to cover it. Like the US Government is going to bounce a $600 check?
Madness. I’m moving to a credit union
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