Banks & Overdraft Protection

[marty56]

IMHO Overdraft is very bad idea.  I rather use a credit card and revolve a balance then use it.  Also I have my auto loan, mortgage, and credit card in the same CU so I would be a fool to risk that relationship to use OD.

[laz98]

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@Anonymous wrote:

I work for a bank and I have to say that I agree with the fees. The fact of the matter is you can go run your debit card as credit and clean your account out completely and it would take several days for the charges to actually hit your account depeding on how it's coded by the merchant.  In the mean time you could write checks or come in and withdraw the cash, all before the transactions you already did clear the account.  If the bank did not provide you with over draft protection then you would pay a fee to the bank and a fee to the merchant.  With overdraft protection you only pay the fee to the bank.  I small price to pay for being irresponsible.  It is not the banks job or their place tokeep track of your spending.

Learning responsible money management did not happen over night, but eventually we both realized that we didn't want to donate anything more to the bank and the only way to stop was to start tracking our money.

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This is exactly what I told that lady in my original post!!!!  

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

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Although I agree in part -- especially about the check register -- but the fact is that with a debit card purchase the merchant obtains an authorization upon swiping the card.  That authorization shows up immediately in the bank and the bank automatically freezes that portion of your available funds.  You simply are not able then to withdraw that money from your account.

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That's not always the case.  Again, it depends on how it is coded by the merchant.  Sometimes it is an imediate thing, but I've had transactions that have taken days to even show as pending on my account.  This is especially true of online pruchases.I think as technology advances it will become more instantaneous, but we're just not there yet. 

But the fact of the matter remains, the only person responsible for tracking your spending and keeping up with your finances is you.  I see it every day.  People come in and knowingly place there account in a negative status and then come in screaming cause they want to know why they have fees and what happened to all their money.  Some of them are young and dumb and just learning cause they're new, but you'd be surprised how many older adults who ought to know better can't seem to keep up with there money.  It's insane.

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According to Citibank & USAA, merchants have no ability to "code" purchases.  They either submit the charge online or they submit it offline.  If offline, the merchant is totally liable because the sale has not been authorized.  That your bank will still allow a sale without proper authorization go through when the card holder is already overdrawn is an issue exclusively for your bank.

Many merchants only make a $1 authorization and then do not charge the balance of the order until it actually ships. 

[Anonymous]

You're right, every institution handles transactions differently.  That said:

In gerenal, It comes down to how the transaction was done.  If you entered your pin number and the transation goes as a debit that's different than if you sign for it and the card is run as credit.  Pin transactions, generally, leave the account immediately.  If it's processed as credit then the credit card networks are involved  and it can change how long the transaction takes to actually post to your account.  Getting authorization does not gaurantee that funds were  not already obligated to something else.  Only that the card is active and funds are in the account at that time.  Which is why they do that $1 thing.

I will concede that every institution is different in the way that the transactions are processed.  But at the same time, even if the institution only offered electronic transactions, they would still be hard pressed to control your spending.  You can still write checks, withdraw cash or authorize ACH transactions all at the same time as having used your debit card.  And that can lead to you spending more than you have.

[MattH]

I only made the mistake of overdrawing my bank account once, circa 1979 when I was an undergraduate.  Fortunately for me, it was a very local bank in a very different time: the branch manager actually called me to say they were holding a check for a little more than my balance and since I had never had any problems before this one time he would give me 24 hours to come up with the cash and prevent the check from bouncing.  I thanked him profusely and never made that mistake again.  I think it's pretty slimy of the banks to exploit careless people so heavily, but people should learn from their experience.  It's like the old joke, "doctor my head hurts when I..." "Don't do that then."  I think it took me two hangovers to learn my capacity for alcohol, but at that age I knew people who got a hangover every weekend for years, which puzzled me then and still puzzles me.

[Anonymous]

Shared blame. Shared responsibility.

Ultimately, you the checking account owner have the responsibility of making sure you don't spend more than is in your account--either writing checks or using debit.

However, overdraft fees are a game the banks play because it pays BIG MONEY. If five smallish charges bounce--say around $200 total--at $30 a pop per overdraft that's $150 in overdraft fees. Cha-ching. A PayDay loan wouldn't cost that much in interest so the banks are really charging far more than PayDay loan companies.

[Anonymous]

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@Anonymous wrote:
Shared blame. Shared responsibility.

Ultimately, you the checking account owner have the responsibility of making sure you don't spend more than is in your account--either writing checks or using debit.

However, overdraft fees are a game the banks play because it pays BIG MONEY. If five smallish charges bounce--say around $200 total--at $30 a pop per overdraft that's $150 in overdraft fees. Cha-ching. A PayDay loan wouldn't cost that much in interest so the banks are really charging far more than PayDay loan companies.

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I think overdraft fees in and of themselves aren't evil, just the way that some banks manipulate the system to gouge you for more than is reasonable.

[Anonymous]

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@Anonymous wrote:

I think overdraft fees in and of themselves aren't evil, just the way that some banks manipulate the system to gouge you for more than is reasonable.

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Very much correct. The bank I work for records debits to the account from small to large so that the maximum number of transactions clear the account rather than overdraw.

Other banks go from large to small. Their rationale is "Well, the customers want us to pay their larger, big ticket items first because those are things like mortgages and car payments." I'm not saying they are devoid of any standing for such a policy, but when a bank pays the debit and still nails you with an overdraft charge, they lose their argument. Payments aren't bouncing. They are just racking up more fees.

[lkcrew426]

I am a debit card manager for a smaller bank (25 mil assets) and worked formerly as a teller for years. Our bank provides $1000 OD to every customer provided they make at least that amount of deposits within the first 30 days of account opening. Our OD fee is only $18, much less than pretty much every bank I know of. We still make around $1.5 million a MONTH on OD fees. Imagine what the big banks are raking in. Our policy also allows cash to be withdrawn up to that $1000 despite any pending transactions. Crazy, I know! (I don't make the rules, just enforce them) Many companies do not send the charges through for several days although they show pending immediately. Companies do "code" transactions when processing by the way they choose to run their cards and settle their machines. If they don't settle immediately, they risk losing their money - but if they never let it fall from a customer's account the bank is mandated to pay it. Each and every one of our customers is given the opportunity to opt out of OD protection, but would still get the fees if they are simply NSF.

[Anonymous]

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@cruthisfamily wrote:
I am a debit card manager for a smaller bank (25 mil assets) and worked formerly as a teller for years. Our bank provides $1000 OD to every customer provided they make at least that amount of deposits within the first 30 days of account opening. Our OD fee is only $18, much less than pretty much every bank I know of. We still make around $1.5 million a MONTH on OD fees. Imagine what the big banks are raking in. Our policy also allows cash to be withdrawn up to that $1000 despite any pending transactions. Crazy, I know! (I don't make the rules, just enforce them) Many companies do not send the charges through for several days although they show pending immediately. Companies do "code" transactions when processing by the way they choose to run their cards and settle their machines. If they don't settle immediately, they risk losing their money - but if they never let it fall from a customer's account the bank is mandated to pay it. Each and every one of our customers is given the opportunity to opt out of OD protection, but would still get the fees if they are simply NSF.

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I wonder if the bank charges the $18 fee if the charge is covered by the OD protection or just when the item is returned NSF.

Your bank doesn't seem totally unreasonable.  I just wonder what would happen though if everybody learned math and stopped overdrawing their accounts.  What would banks do then?