Thursday, September 24, 2009

Top 5 Sneaky Overdraft Traps - WalletPop

Top 5 Sneaky Overdraft Traps - WalletPop: "2. Reordered Transactions

Just because you bought a smoothie in the morning with your debit card and paid your rent in the afternoon doesn't mean that's the order in which your transactions will be cleared.

Banks often change the order in which debit transactions clear Рand tend to clear debits before clearing any deposits made Рfrom highest to lowest amounts. By doing so, the customer's account is depleted more quickly and they'll incur more overdraft fees, says Borné.

Say you have $100 in your account. You buy a latte ($5), gas ($50), groceries ($35), swing by the drugstore ($8) and the dry cleaner's ($25). Processed chronologically, only the last transaction triggers an overdraft. Reordered from high to low three purchases do.

Institutions justify this practice by claiming that the largest withdrawals, like a mortgage or car payment, are the most important and should be paid first, says Borné. Bank of America, Chase, Citibank, PNC Bank and Wachovia pay daily transactions in order from highest to lowest, according to a CFA survey. SunTrust and U.S. Bank use any processing order they choose.

Solution: Buffer your account with an extra $100 that you don't intend to spend. That way, small day-to-day transactions won't end up costing you more than you anticipated."

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1 comment:

Anonymous said...

The banks are harging these fees to provide false prophets now that mark to market is suspended and they can't charge similar fees for credit cards. Bank tellers blythely defend such charges. Bank tellers should be subject to racketeering charges just like nazi prison guards who were just taking orders. THen they would have the guts to speak up. These banks should finally be euthanized and bring us all peace.

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