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Dispute on Processing Order of Debits

I forgot about an automatic payment that I had set up with my account and caused it to overdraw. I also had three other small transactions, which combined, would not have been large enough to cause me to overdraft. My bank chose to apply the largest transaction first and then the others. They paid all four transactions, but also charged me an overdraft fee on each one. Is this standard procedure? Is there any way I can get them to only charge me the one overdraft fee?

Banks are not required under any federal law to disclose the payment order of checks. There are two schools of thought here. One is, that by paying the larger items first, a person's home and car payment is less likely to be returned, and these are bills that can be very important. The other thought is that by paying smaller items first, as you suggest, there may be fewer items returned for non-payment.

You should ask your bank what their policy is. If you want to vote with your wallet, voice your opinion and find a bank that has a "low-to-high" payment system. Some banks may also generally pay items in account number order, or first in, first out. We say "generally" because cashed items always go first. These are ATM withdrawals, checks cashed at the teller, etc. The cash has already left the bank in these cases.

You may also want to ask your bank for a refund of some of these fees, explaining how it happened, and that it doesn't happen often, and ask about any programs they have that could assist in the future, such as where money can be moved from a savings account to your checking to cover an error. This product often has a small transfer fee, less than a overdraft fee.

Published on 6/04/08