My son has a checking account at a bank and has had NSF fees charged to his account over the past few months. After reviewing his statements, I noticed that the fees applied when he used the ATM to withdraw funds. A few of those times, the account was already overdrawn, he used the ATM, he got his money, and then was charged a fee. I called the bank and questioned this .... was told you can use the ATM and receive cash even if the account's overdrawn because they feel it's a "service" in case the customer needs the funds in an emergency. I then asked how much can the account overdraw in these instances. They couldn't give me specifics. I asked what criteria is used to determine when an ATM withdrawal will be allowed to overdraw and the disclosure just states "we may allow...."
Of course, this fee income is great for the bank. Why would any bank allow a cash withdrawal when the cash is not there? And, is the bank within reg doing this, and if they do, shouldn't that be disclosed?

I don't really know the banks specific policy, but we have had customers that use an ATM when funds are there the day they use the machine, but then later that day or the next day checks come in and bring the account negative then the ATM comes in when that machines owner runs their work and draws it further negative which causes another fee. My bank allows up to a specified amount depending on the account type, to go overdrawn, but there is a charge for each draw from the account whether it be by check or ATM.

It sounds like his bank has some kind of overdraft priveledge program. Inquire as to what type of disclosures were either 1) Given at account opening; or 2) Were mailed to him once he qualified for the OD program. A lot of mailed disclosures go unopened, in our banking experience. This can cause troubles for the customer, as well as for the bank.

Another problem may be that the bank's ATM is not "online". It may not update deposits and/or debits for 1-3 business days. Thus, the ATM thinks he has money.

The best way to protect yourself against unwanted fees, is to simply balance your account. That may sound elementary, but you would be suprised how many bank customers do not balance, and actually rely on their ability to withdraw money at the ATM as a balancing system. Not too smart, especially if its not online. The bank has to pay these withdrawals.

Just curious, but why would he attempt to withdraw money at the ATM when he was already overdrawn? Again, not to be anything but helpful, but that is basically asking for another fee.

Hope this helps.

And from a community bank's standpoint, I am sure the bank will help him reconcile his checkbook and show him how to do it, maybe for a fee, but may without a fee, it depends on the bank. However, it is a fee worth paying (unlike NSF fees) if he learns how to manage his checkbook.

Oh, if we could just get our kids to do what they're supposed to do!!! And, that's what I had told him. But, evidently, he used the ATM one day when he truly had funds, but of course when checks came in the ATM transaction actually overdrew (is that a word?) the account. BUT, there were actual instances where he didn't know he was already overdrawn, for whatever reason, and went to the ATM, requested $40.00, received it, even though there was no money in the account. That's the part I don't get. And, he doesn't have any kind of OD protection tied to the account. They asked him if he wanted it when it was opened, but he declined. It just seems like this is a fee generator for the bank at the customer's expense. NSF fees when charged legitimately, OK, but giving money at the ATM when the account is already overdrawn???

I totally see your point and understand your frustration.

I am responsible for reviewing NSF checks/accts daily. Our bank is not online. If your son banked with us, he could write a check, that depletes his funds today, but it won't show up at the ATM for 1-3 days after it clears the bank. The ATM, (the bank), has no way of knowing there is a negative balance if he goes to the ATM during those 1-3 days. Believe me, the bank would not allow for the ATM withdrawal if it could stop it, but we can't, again, since we're not online. Nothing upsets me more than those customer's who have figured this out and withdraw cash, even though he/she knows the account is overdrawn. We can't stop it and unfortunately don't even know its happened until the ATM withdrawal hits the NSF list.

I hope this makes sense. Ultimately, the bank is not giving him funds just to make a fee, if they could prevent the ATM withdrawal on a negative balance, they would, (assuming there are no assigned OD priveledges or protection). At least that is my case.

When I spoke to a bank rep about allowing ATM withdrawals when an account is already overdrawn, and was told that they allow this to happen in case of "emergency" for the customer. But, could not tell me the criteria used to determine when they allow it, the dollar amount they allow to withdraw and the total OD amount they would allow.

I don't know if there is truly an answer to this ..... maybe the rep I spoke to is giving me incorrect info. But I appreciate all the input from everyone

At a bank I used to work with we had two types of OD limits. One was an account link, which drew funds from either a savings account or a credit line that covered the checks and withdrawals which would ordinarily overdraw a checking account. There was no fee for this service.

The other OD protection that kicked in was an internal OD limit which is established by the bank. The limit is set after a review of average balances, deposits, time with the bank, etc. We NEVER shared the amount of this with a customer as it was a curtesy to our good customers and not a line we wanted them to use. Standard OD charges applied but instead of a returned check, the item was paid, thus avoiding another NSF fee from a merchant.

Abuse of the internal OD limit would result in decreasing that set amount.

Your son may have a similar circumstance. His use of the internal limit though is going to result in it's going away. He really needs to get a handle on his account so this doesn't happen to him in the future.

Your post is very interesting. My son opened a savings account with a financial institution and received an ATM card and withdrew more funds than were available in account. He was charged a NSF fee as well as "per day" fee. Then, in his stupidity, he attempted to make another withdrawl on overdrawn account through ATM and succeeded! Additional charges. Total charges $120.00 I was told by branch manager that the bank allowed customers to overdraw $200.00 as a "service" to the customer. My reply was to laugh and state that this was a fee incoming producing tactic. Yes, I did review the disclosures, however, do not recall if automatic overdraft privilege was stated in disclosures. My son was wrong -- no doubt about it. The bank was wrong also, but then again, there's the fee income produced.....

We would never have told your client the $200 figure, and never added this to a savings account so I can't help out much. I will say though that the overdraft coverage was a courtesy to our clients who did not abuse their accounts, not a fee product. I have had many a client make a mistake and not note a monthly fee, atm fees, etc. and overdraw their account just a few dollars. The protection saved them from the embarrassment of having to go from merchant to merchant and pay both NSF fees as well as the bank's OD fee. They gladly paid the OD fee as it was much cheaper than the bank sending the item back.

The OD fee was lower than the NSF fee by the way. While it is income to the bank, they also take the risk of covering an overdrawn account. They take additional risk when the situation is abused as you state your son did when attempting to make another withdrawal KNOWING that he was overdrawing the account. I personally would have closed his account if he crossed my desk with a complaint.

Clients who have been with a bank for many years often see the fee waived due to their value to the bank. A one time issue with a client who has a significant relationship with the bank, and does not abuse the account is more often forgiven than not. Clients who purposely abuse the situation do not see this happen.

I hope your son took this as a lesson on how to manage his account verses holding the bank as the evil guy. He made a mistake and compounded it further by abusing the situation. I'm hopeful he won't do it again. You may not realize it, but overdrafts and NSF’s have their own risk to the bank. While you indicate we charge the fees purely to capture your hard earned money, you are mistaken. I have closed many an account in my day that generated SIGNIFICANT funds for the bank in NSF and OD fees. These clients are a risk. We don’t want them any more than the merchants want their checks.