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Home >> Accounts >> Checking Accounts
Why Does My Bank Do Things this Way?
I have two questions about the way my bank does things.
1) Why do they post my cash deposits as "pending"?
2)If I have two checks hit my account on the same day, and not enough money to cover both, why do they bounce both checks instead of covering the smaller one?
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 Some banks process transactions in "real time," and others hold everything for end-of-day processing. Traditionally, savings banks and other thrift institutions posted deposits and cashed checks to your account while you waited at the teller window. The account was updated, and that was that. Commercial banks, which have been processing checking accounts for a lot longer, did everything in end-of-the-day "batch processing", and that included cash deposits.
A lot of banks now "memo post" transactions occurring during the business day, and update customer records at the end of the day. Your bank seems to be among this group. What's important is whether the "pending" cash deposits are available to you for withdrawal or payment of checks presented against your account.
As for paying or returning checks, your bank is allowed to decide the order. Some states require banks to disclose the order; most don't. There are pros and cons to every payment order option. When a banks pays checks largest first, the bank often bounces more individual checks and assesses more overdraft fees overall. Some would argue that this ensures that larger, often more important, checks (like rent, mortgage, taxes, etc.) get paid.
If the bank pays smaller items first, fewer checks tend to overdraw accounts, but larger checks may be bounced, and then there are banks that pay electronic items (ATM and POS payments, etc.) first, checks cashed over the counter next, and then decide largest first or smallest first on other items. Some banks vary this somewhat by posting checks on a given day in serial number order.
We recommend that you do two things -- first, ask your bank to tell you the order in which it pays items on your account. You will at least have the information. Secondly, remember that you ultimately can control what happens by managing your account carefully so that you don't overdraw it.
Published on BankingQuestions.com 1/10/07
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