I used to work in customer service in a bank and I am currently working for a credit union, and I must say that the software writers that code for banking transactions need to fix a serious glitch. Here’s the situation:
I have an account with a local financial institution that I use solely to pay my bills, so I rarely keep much extra money in it. I usually put just enough in it to pay the bills through their bill payment service and that’s it. Well I ran into a serious glitch this past weekend that needs to be addressed by banks that have some criteria about how their transactions POST to an account. What I mean by that is some banks require you to make your transactions (whether deposit, payment, billpay, etc.) before 2:00 p.m. for them to be counted in that night’s processing. I personally don’t understand the reasoning for this 2:00 rule, but for a while, these banks just “made it work”. Well, after probably many changes to programming this glitch has arose and has not been dealt with. Here’s a hypothetical situation:
John Smith deposits $1,000.00 cash into his account on Monday at 3:15 P.M. This is money he is paid on a regular basis for a rental house he owns. He only had $100 in the account before this deposit. John gets home that evening and after checking his mail, realized he has failed to pay his cable bill. He has until 5:00 P.M. today to pay it or he will be charged a late fee. So relieved that he has made the deposit into his bank, John calls SateLiveTV to do a payment over the phone. The cable company accepts VISA so John pulls out his VISA Check Card and makes the $150 cable bill payment.
Tuesday morning, John wakes up and logs into his internet banking to find out his account has been assessed a $38 overdraft fee on a gas purchase he made over the weekend. The transaction would look something like this:
Note by the green arrow the balance was still positive when the fee came out. Why would they take an overdraft fee out when the balance is positive you ask? Allow me to explain.
When transactions post to your account, banks will take into consideration any “pending” debit transactions (or “authorizations”) and take that money out of its calculated balance. So since John had the hold on his account for $150.00 to SateLiveTV, the system thinks this person is spending the bank’s money and not his own, so they charge him an overdraft fee. What the system doesn’t take into consideration is any pending CREDITS on his account. Even though John deposited the $1,000.00 before he paid his cable bill AND even though it was CASH!!!, it still doesn’t matter to the system. Why is that? Why wouldn’t the system count that as part of his balance. Well, here’s why. The system has no idea when that deposit was made. All it knows is that it was done after 2:00, so it must wait until the next business day before it affects the account balance.
I find this as a serious problem. Who’s money is it while it’s “waiting to go to processing”? John sure can’t use it. What if it had been a $80,000 CD on Friday. Does John not earn interest until Tuesday morning? 3 days @ say 5%, that’s close to $33. Who gets that money? Well, we know John’s not getting it, his CD won’t open until Tuesday. Now imagine ALL the deposit transactions that occur after 2:00 PM. that get delayed a full day before the customer has access to those funds.
The 2:00 rule is a scam and a rip off and I suggest people flee from such an organization that would do that to their customers. There’s no excuse for it when there are thousands of other financial institutions that can do all their daily processing the same night.
So, back to John’s situation. Viewing this transaction history, how could a bank ethically charge him an overdraft fee if he did each of these transactions in the order they appear?