Another customer service horror story

[ilbob]

Banks very often play with dates to make you think you have different amounts of money than you really have in an effort to cause you to bounce or overdraft.  Say you deposit money through an ATM after the bank is closed, then go use your card to make a purchase.  Each transaction has 2 times.  The time when the transaction was actually made, and the time it cleared the system.  So while your deposit time was in the evening, the clear time is sometime the next business day.  The purchase time has the time you made the purchase, we'll say the same evening, and the time the transaction goes through their credit system, sometimes up to a week later.

A common bank trick is to use the clear time as the effective time of deposits but the transaction time as the effective time for purchases.  So even if you physically deposit money before you make any purchases, if any transaction happens before the deposit clears, (even if the transaction hasn't cleared) you could get an overdraft even though you never actually spent money you didn't have.  This would be akin to a check bouncing because you didn't have the money in the account at the time you put pen to check instead of when the check receiver tries to cash it.

Now one defense of this might be "it's to prevent fraud and people overspending with money they don't have and disappearing".  That may be true, but the right thing to do would be to not give you an overdraft if you are indeed an honest customer who in fact did deposit enough money before you made the purchase.  But banks don't do that, mainly for the hefty overdraft "processing fee" that is 100% profit for them because of a few twisty fine print rules.

It is a not a bank "trick". It is law. You do not actually have money in your account until the check clears. The check is just an IOU when you deposit it. It does not become money until the guy on the other end pays it out of his account into yours. Spending the money before it clears is called "check kiting" and it is a felony that many people are in jail for.

As a convenience to customers, a lot of banks are pretty lax about this kind of thing.

[ilbob]

Mech, I'm with Bank of America as well with no issues.  I use my checkcard almost exclusively and even then, my check register reports a lower numbe than the web site. 

FWIW, BoA is blazing fast reporting transactions of all kinds.  The only ones that run slow are checks I deposit from sources I've never used before.  That first check will take a few days, but repeats or checks from sources that other customers use as well (large companies for example) go through quickly.

Chris

These days a lot of checks no longer go through the old clearinghouse. They receiving bank actually takes a picture of the front and back of the check, and then destroys the paper. It speeds the clearing process dramatically when you do not have to physically transport paper checks around.

[Regolith]

Mech, I'm with Bank of America as well with no issues.  I use my checkcard almost exclusively and even then, my check register reports a lower numbe than the web site. 

FWIW, BoA is blazing fast reporting transactions of all kinds.  The only ones that run slow are checks I deposit from sources I've never used before.  That first check will take a few days, but repeats or checks from sources that other customers use as well (large companies for example) go through quickly.

Chris

These days a lot of checks no longer go through the old clearinghouse. They receiving bank actually takes a picture of the front and back of the check, and then destroys the paper. It speeds the clearing process dramatically when you do not have to physically transport paper checks around.

I've seen some places that run the check like it's a debit card.  They run it through a little machine that reads all the pertinent information, then they hand the check back to you. 

[K Frame]

I used to work for Navy Federal Credit Union and got to observe a LOT of the day to day operations.

The way a large financial institution handles checks is absolutely incredible.

I would say that in 99.999% of all cases, human hands never even touch the check.

Machines open the envelopes, extract the payment stub (if a payment) and the payment check, scanners orient both properly (including flipping them over if they're backwards), and imaging them.

What a lot of people don't know is that the ink used to print the account and routing transit numbers at the bottom of the check (as well as some other numbers on the check) are not only machine readable, they're also magnetic. It's an anti-forgery mechanism, but it also helps make automation faster and more sure.

Back in 1996 on any given day Navy Federal was getting in 100,000 or more checks for various payments.

[Balog]

Setting up a hard floor for yourself that is above zero is probably the best thing you can do.  Also, you can arbitrarily subtract $100 or more from your check book register so your running balance will always be $100 lower than actual. 

A hard floor is an excellent idea. We generally also round up to the nearest 5 or 0 number when entering debits into our check book. Provides a little cushion for lost receipts etc.

[mtnbkr]

Don't you guys have a savings account tied to your checking as an overdraft protection?  The fee to draw money from savings to checking is less than a bounced check fee.

Chris

[K Frame]

Fee to draw money from savings to cover checking?

I don't play any fees...

[Scout26]

I use USAA for my auto insurance.  I don't think they have any physical branches in my area. 

I've been with USAA Federal Savings bank since 1985 and that includes four years in Germany.  I have never set foot in their bank.  Yet, I've managed to do just about all my banking with them.  I do have a small savings account at local bank, but that is just so that I can get the jug o' pennies counted for free.     If I get a large amount of cash (rarely), it's off to the PO for a MO then I drop it and a deposit slip in the postage paid envelope to USAA. Great on-line services and support.