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Paying Checks Largest to Smallest Causes Problems

I recently "bounced" some checks, based on my banks payment order. Seven checks were returned with the largest amount being $25. Fifteen checks hit the bank on Monday and eight were returned. My bank has an automated method of paying the largest value checks first. The amount overdrawn was a total of $126.

Clearly, the bank has chosen a method of setting up its system to maximize the number of checks that will bounce. In this case if they chose to charge any of the four checks over $126, instead of the lowest value checks, I would be looking at fees of $35 instead of $245. My question is, is this legal or moral in the banking world?

A small checkbook error can be costly. As you noted, by paying the smaller items first more checks would be paid.

Many banks adhere to the philosophy that the larger checks are for mortgages and car payments. They believe you'd want those paid to protect your credit, rather than the small checks to the grocery store.

Some banks pay largest dollar items first and others pay the smallest first. Still other banks clear checks based on the check number and some just take them as they come. You also have to allow for withdrawals that don't happen by your checks, such as counter checks, ATM and debit cards, automatic transfers for loans, insurance, gym memberships and more. Payment orders can be tricky items.

Most states do not require a bank to pay the smallest items first in check processing. You may want to check your own state laws.

This is actually a good question to ask your bank. How do they pay checks, largest to smallest, smallest to largest, or another way? Your decision to bank where you do may be based in part, by their answer. While none of us plan to overdraw our accounts, it can happen. It can also be costly. The best thing you can do at this point is to talk to your bank. If this is a rare occurrence they may well refund at least a part of your fees.

Published on 3/14/07