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Order of Posting and Overdraft Fees
I do not overdraft my account very often, so I normally do not have this issue. However, recently I overdrafted my account, and I wanted to overview what my bank did.
Basically what happened was I bought some food for my father at a food store. My balance when I charged my account was $32, I over drafted with a charge of $62, sending my account into -$30, I saw it on the account the night I made this transaction. The next day I checked my account, it was -$300.
When I looked into my account, I saw that they had rearranged my transactions from dates back to before Mother's Day in largest to smallest purchases. They said that's the way their system does it when you overdraft (from dates from 05/08 to 05/11). I had several (seven charges) of $15 or less, and a few larger ones of $50-$200. They had all the larger charges listed first, and then (because the overdraft charges themselves are larger then $15), the overdraft charges posted before transactions I had three or four days ago. Then, they gave me an overdraft charge for every small transaction, because at that point I was -$150 or so. The overdraft charge itself made the account balance more negative, so more things started to get charged (things I bought two to three days ago) to my account with a negative balance. Everyday it was like a chain reaction. First it was only negative $150, then $220, then $320, and they kept fitting in more and charges to the negative, making the account spiral. When I first saw the account go into negative on the first day, I deposited $350, on a Tuesday at 4pm, and I have yet to see it deposited into my account. My available balance shows +$64, but it says my account is still -$250. I am not sure how that works out.
At this point, I have a total of seven overdraft fees, one $50 fee I don't even know for what, and all this is because I overdrafted my account with one charge. I am going to have to go to the bank tomorrow cause it looks like it's going to keep getting worse, every time I check it more and more fees are continuing to be added, even though I have been in the plus for two days. Also, all the transactions before this account were not pending (maybe one or two were in pending) and when I checked they took five to seven charges and put them back into pending. Any help on how to handle this would be great.
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 You really need to get into the bank for a thorough explanation, but here is some information. First, look at the dates involved. The transactions were made from May 8 - 11. That involved a weekend. It's not at all unusual for debit card transactions, particularly those for which the cardholder doesn't use his/her PIN, to be posted to an account two or three days after the fact (sometimes longer), and both because of customer spending patterns and the fact that bank's don't actually post transactions on weekends, a lot of transactions tend to accumulate on Mondays or Tuesdays. Remember, that it's not the date that you initiated a transaction that count, it's the date the transaction hits your bank for posting.
Second, it is not at all uncommon for banks to post in largest first order. Some banks will tell you that they use that order for posting a day's transactions to ensure that larger payments, such as rent or taxes or mortgage and loan payments, get paid first, so they are less apt to be bounced for insufficient funds. Other banks don't bother with such explanations. All banks that post largest items first without imposing on themselves some sort of daily overdraft fee maximum, experience higher overdraft fee income than they did before changing to that posting order policy. It is probably accurate to say that some banks deliberately made the posting order choice to improve overdraft fee income. As for the deposit, check with your bank on what those balances of +$64 and -$250 mean.
You should avoid overdrafts by maintaining an accurate and up-to-date account record on your computer or in an old-fashioned checkbook register. You might also look around for another financial institution if you are not happy with the policies of your current bank. Make sure you get information on any new bank's posting order policy (most banks don't offer that information proactively). Don't be surprised if most banks you talk to post large items first. Try to find a bank that sets a daily cap on overdraft fees, if you think you might become overdrawn again.
Published on BankingQuestions.com 5/19/10
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