PSA: Friends Don't Let Friends Bank With Major National Banks

[drewkitty]

This is the banking industry standard practice for applying debits and credits to an account.

That's where all debts are applied on the same day prior to all credits on that day, in inverse order. (Highest debit first, all the way through lowest debit . . . pausing to hit you with rolling overdraft fees after each transaction . . . then smallest credit up to largest credit.)

Let's do the math.

You have $500 in your account prior to pay day. You start your day with a $5 latte from GenericCoffeeShop. You deposit $600 in a single paycheck, purchase $100 in groceries on debit card, and electronically present a $400 check on the day you are paid. Oh, and you pay your cell phone bill $50 and have dinner out with your other of choice $50.

You would expect $500 + $600 == $1100 minus $605 in transactions = $495

What you actually get is
$500 - $400 = $100 [check]
$100 - $100 = $0 [groceries]
$0 - $50 = ($50) [phone bill]
($50) - ($25 overdraft) = ($75)
($75) - ($50) = ($125) [dinner]
($125) - ($25 rolling overdraft) = ($150)
($150) - ($5) = ($155) [latte]
($155) - ($25 rolling overdraft) = ($180)

NOW the deposit hits

($180) + $600 == $420

Notice the $75 in overdraft fees you're suddenly missing. READ YOUR STATEMENTS, FOLKS.

Now let's imagine that you're living closer to the wire. You have $100 in the bank, deposit your $600 paycheck, and do the same $590 in transactions. You would expect to end up with a balance of $110.

This is gonna hurt. A lot. We are also going to assume an overdraft limit of $500. Your fees will vary but are often higher.

$100 - $400 = ($300) [check]
($300) - $25 overdraft fee = ($325)
($325) - $100 = ($425) [groceries]
($425) - $25 overdraft fee = ($450)
($450) - $50 = ($500) [cell bill]
($500) - $25 overdraft fee = ($525)
($525) attempt to present [dinner] DECLINED
($525) - $5 = ($530) [latte] HONORED
($530) - $25 overdraft fee = ($555)
($555) - $25 over-the-overdraft-limit fee = ($580)

NOW the deposit hits:
($580) + $600 = $20

So what you see is that your dinner bounced for no reason and then when you check your ATM or statement that all your money is gone. Aren't you glad that dinner bounced, despite your date's reaction? Because if it hadn't:

($525) - $50 = ($575) [dinner] HONORED
($575) - $25 overdraft fee = ($600)
($600) - $25 over-the-overdraft-limit fee = ($625)
($625) - $5 = ($630) [latte] HONORED
($630) - $25 overdraft fee = ($655)
($655) - $25 over-the-overdraft-limit fee = ($680)

DEPOSIT ($680) + $600 = ($80)

Tomorrow: ($80) - ($25 rolling overdraft) = ($105)

Hope you check your statement soon, because the rolling overdraft will keep hitting your account daily, even with no activity . . .

If you ever try to stick a bank with a negative balance, they get out the big sledgehammer called ChexSystems, and you find yourself bankless and not by choice.



Use Credit Unions. They will cheerfully explain to you the technique they use to apply credits and debits -- unlike commercial banks who thrive on cheating their customers.

Comments

[weirdodragoncat.livejournal.com]

I *know* for a fact that Wells Fargo does things like this because I had my first ever bank account with them. NEVER AGAIN!!!

I have *not* had that experience with BofA however....they do in fact post credits *before* debits unlike Wells Fargo. Believe me...if BofA did it the other way around, I would have left them loooooong ago.

and if it wasn't for the credit union I currently work for sucking rocks as an employer so bad, I might have considered switching things.

[urox.livejournal.com]

BofA has many other problems. Like..
Sending your account information out to the wrong email account (thank ghod I owned the domain and had a catcher for non-specified addresses).
Sharing your information with third parties (and they settled in a class action lawsuit while admitting no wrong doing).
Spamming your account with "BillPay" when you have not signed up for it and no way to cancel it without signing up for it and then turning off the email. Insiders stealing credit card information.

[weirdodragoncat.livejournal.com]

huh. While I have no doubt that those things have happened to *some* people...none of that has happened to me.

I've (thankfully) had very little issues with my account with them.

[tiggerypum.livejournal.com]

WaMu doesn't do that either, I have my statement online.

If I went to the bank to do a deposit, it shows up roughly at that time of day. If I purchase something later, it comes out after that deposit.

My auto deposits from my employeer seem to vary as to when they are credited, but I have one day with online bank payments, my paycheck, and assorted other things that came in - all on that day, and scrambled - my paycheck came in someplace in the middle of it.

Anyone living on the edge probably needs to actually check their balance online or at an atm before making purchases. Or write a check, I believe that still delays things, although not for as long. Good point though, in pointing out that some banks have this habit. :S

[tshrew.livejournal.com]

Contra to this, the bad banking experiences I have had were with credit unions. Albeit by bad experiences were 17 years ago.

BoA also did me bad when I was leaving my ex-. Because I had, at one time, shared an account with him, my own account, that he was not on, was hit and drained when he ran overdraft on the account he opened completely separate of the one we once shared. The shared account had been closed at the time we opened accounts that were 100% separate. I eliminated that from happening again by changing banks completely.

[morganhillchris.livejournal.com]

Ugh! Now I begin to grasp what's been going on! You've tried to explain it to me, but if I read this a *bunch* of times, I begin to 'get' it.

And they don't even tell me they love me.... ;-)