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Order of Posting Revisited
Why do banks have a right to arrange the way you spend your money? What law allows them to post withdrawals from largest to smallest instead of the way I spent my money first in first out?
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 The Uniform Commercial Code, adopted by each of the states, typically includes language like this:
"... items may be accepted, paid, certified, or charged to the indicated account of its customer in any order."
The order of posting can be affected, too, by a bank's ability to pay or not pay an item. For example, in a given day's transactions, a bank cannot return ATM withdrawals and debit card transactions, nor can it return checks that were cashed out over the teller's counter; therefore, most banks post those items first. Checks presented by other banks for payment, however, are subject to return, and that's where the order of payment becomes an issue for so many customers. If there's no balance problem (enough to pay all the checks), there's not a bit of difference whether large checks or small checks are posted first, even random order produces the same result.
If there aren't enough funds in an account to pay all the checks, and largest items are paid first, there may be more overdraft charges to pay than if the smallest items are paid first. Some banks will pay in the order of check serial numbers, so that the customer theoretically decides which checks get paid first. Although there's no law that mandates the order of payment, the question is one that federal bank regulators and members of Congress are looking at as one of the key issues relating to the payment of overdrafts and bank fees.
Published on BankingQuestions.com 3/25/10
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