Rant: Banks, overdraft fees and check floating

[justiceischeap]

I just started a new job after a month of unemployment. Suffice it to say, my "savings" didn't hold over and I'm in the negative awaiting my first paycheck this Thursday. It struck me on my way in to work today that it's illegal for me to float a check (or basically write a check when I know the funds are unavailable) but it's perfectly fine for my bank (or any bank for that matter) to authorize the payment of automated debits because they get to tack on their overdraft fees. So far I've had three different direct debits on my checking account that I forgot to turn off (I have a lot of them, I prefer to set these up to pay my bills so I don't forget and get them paid on time) and the bank has authorized each one for payment (many of the payments being much lower than the accompanying overdraft fees).

Anyway, I don't get why it's any more legal for a bank to authorize these payments, 'cause they darn well know I don't have money in my checking account but if I went out and bought groceries and wrote a check, I'd be doing the same thing, in essence, the bank is doing but what I'd be doing is illegal. My bank is a corporation with more rights than I have but it still chaps my a** plus I'm tired of eating pasta, so all my thoughts are kinda food based right now.

[FSogol]

1. Switch to a local Federally insured Credit Union. It won't eliminate

all banking problems, but they are much easier to deal with.

[justiceischeap]

2. Sadly, I've researched all the local Credit Unions in my area

and there isn't one a qualify for--which sucks. I'd love to give up my big bank and go with a credit union.

[steve2470]

3. long shot here...

Could you maybe get a credit union a bit outside of your area ? I know it's not as convenient, but at least direct deposits and direct debits would be easy enough. Just an idea.

[justiceischeap]

4. I've considered that and may still do it

it's just a matter of having the time to go there and set-up an account.

[yeoman6987]

22. Just get a line of credit

I have a thousand dollars and has saved me on more than one occasion.

[FSogol]

12. That sucks, isn't there a FCU just dedicated to residents of your County? n/t

[NightWatcher]

5. when funds are low you've got to stop auto payments

I think you are at fault if something you set up months ago bounces because you forgot to cancel it when you ran out of cash and the bank is right in charging extra.

I never use auto payments because sometimes I might not get paid till the 12th and the autopay may have been set for the 11th. I always make sure to have the funds before I spend them. I will however contact companies and make a promise to pay just as soon as I get paid. This often works for them.

As far as kiting goes, I know which gas stations I can use my card at a couple of days before I get paid because it takes a few days to go through. I am also not above writing a check for food at the grocery stores where I know it will take an extra day. Some places take out the money immediately, so you've got to be careful.

[ret5hd]

7. 3 paragraphs in which you state things that are all true (imho)...

and none which seem to be disputed by the OP.

Yet not one in which you address the questions/issues brought up.

[NightWatcher]

9. and your criticism added what to the discussion?

I gave advice and my position on related issues raised by the OP (which is what we often do here). You felt it necessary to share that you didn't think I addressed issues brought up by the OP even though the OP mentioned automatic withdrawals, check kiting, and banks charging fees for overdraft.

[Igel]

21. The bank processes the automatic payments.

The bank account holder authorizes them.

There. That addresses at least one legal issue. The bank's not responsible for the automatic payments initiated on the account holder's behest any more than it's responsible for "authorizing" the checks that the account holder writes.

Strictly speaking, we could shift the entire burden onto the bank. As soon as your account goes to 0 or goes negative then the word goes out to all check-checking companies. "Account's no good." Or perhaps the account's cancelled. It rather assumes, though, that people in general are too stupid or immoral to stop writing checks and authorize debits when their account goes to zero. (In cases where it's a bank error I've seen the banks "fix" the problem, if you have a generally good relation with them and ask.) Banks as nanny.

Then again, I had a roommate who often wrote checks against a deposit that hadn't cleared, he often cut it just that close. The checks were (usually) good, but had somebody verified that he had the funds in his account it would have showed he didn't have the money.

[djean111]

6. I never do automatic payments. I pay everything online, through my credit union.

Recently my electricity company, TECO, was trying real hard to get my bank account number and social security number - they are now using Experian to track payments - and I refused.
For anything I buy online that wants to set up a recurring debit, I use PayPal, because it is very easy to cancel recurring charges on the account. Really difficult to cancel recurring charges on a bank account or credit union account, I have found.
I am hyper-aware of all the payments I need to make. Have not been charged any fees for anything for a very long time, by my credit union, I think because I am over 65. I have four boxes of checks from my last order, and they will be part of my estate!

[justiceischeap]

8. If I don't do automated payments, I will forget to pay things

I've learned this about myself long ago. It's the best way for ME to keep things paid on time and since I'm in the process of repairing my credit, it's important that happen.

That said, I wish I was the type of person who was hyper-aware of what needs to be paid. I get that I'm at fault for the overdraft fees, because I didn't remember these 3 automated payments but it still bothers me that the bank can okay these payments so they can tack on overdraft fees and if I write a check, I'm doing something illegal. It's a double-standard that bothers me.

[Orrex]

10. Could you clarlify something?

Are these transactions set up through the various companies (utililities, credit cards, etc.) or through your bank.

If the former, then you likely pre-authorize the transactions. It's common, for instance, for such authorization to include language along the lines of "by clicking submit I confirm my account will have sufficient funds on the payment date, and that I am responsible for any fees and penalties." It sucks, but that's how they get you. By signing up for the service, you're telling them in advance that the money is there, and that's all the guarantee they need to initiate the transaction. If you're lucky, the first failed autodraft can sometimes suspend the service so that future drafts don't occur until you re-authorize the service. It's a hassle, but you need to go to the respective vendors to terminate the automatic debit at each.

If the latter, then you're still kind of stuck, for much the same reason. It's easier to cancel the auto-draft, though, because they're all initiated under one roof (the bank).

Having been in a similar situation, I sympathize, believe me. Unfortunately, your bank is unlikely to look out for you during this financially vulnerable time. You need to be extra careful in keeping on top of your bills when you're trying to get back on track.

Good luck!

[justiceischeap]

11. I usually set-up the auto payments through the service

not the bank. For example, one that came through was Amazon Prime... the auto payments are set-up through Amazon, not my bank. Another is Netflix, same thing. The only thing I have set-up through my bank is my rent and my car payments (which I stopped).

As I stated before, I know the overdrafts are my fault for not stopping those automated payments and I know I'm responsible for the overdraft fees, but I seem to remember a time when banks wouldn't automatically okay payments when you didn't have the money and I suspect that's because they didn't have such great profit from overdraft fees. I also don't like that I could get in legal trouble for writing a check on an empty account but they can basically do the same (not that I would write a check when I didn't have the money--that's not the point of my rant).

[steve2470]

15. the only good thing about your situation is, you got a "short term loan"....

albeit one at horrendous interest rates ($35 charge for, say, a $50 payment). The banks love this, so I feel your pain, been there done that.

[Orrex]

16. I'm not sure

I've only done the auto-draft thing for about 17 years or so, so I can't comment on what happened before that, but in the whole time I've been using such services I've been responsible for overdraft fees.

I've been with the same credit union since 1987, and they've waived fees for me once or twice, but generally speaking I'm on the hook for them when they occur (not often, thankfully).

You're in a tough position, and it's easy to get swamped. Again, good luck.

[oldhippie]

20. With every bank I have ever dealt with .....

.... the overdraft protection and it's associated fee are an agreement you signed with the bank when you set up your account. You probably agreed in writing to have the bank pay the debit amount rather than have it denied for insufficient funds, and then have to pay a penalty.

That's the way my current checking account was set up. It has an automatic $500 of overdraft protection built in as a default. I don't need or want it. I keep pretty close tabs on my accounts and I always have a healthy buffer (usually $1000 or so) in the account to cover any slip-ups if it ever happens. I have tried a couple of times to get the automatic overdraft protection cancelled or removed without success. The bank personnel say they can do it, and then call me back and tell me that there is no mechanism to remove the protection. They say that since the protection is free (except for the fee if you have to use it) why would anyone not want it?

So technically, you have probably agreed to have the bank do what they are doing.

[Codeine]

13. You can tell your bank not to do that.

I set mine up so it won't authorize any overdrafts at all.

[justiceischeap]

24. I will look in to this.

As far as I know, I don't have overdraft protection set-up.

[hobbit709]

14. I NEVER allow automatic withdrawals.

The banks do it because they can. Which is why I don't give them any chances to screw me.
My credit union has no monthly fees and if I do overdraft, the fee is about half of what a bank charges.

[NV Whino]

17. Any auto pay fees I have are on a credit card

Never directly from my account. Bills get paid on time, and I have a few days to pay the credit card. Although, if you are trying to re establish credit, that may not be an option for you.

[justiceischeap]

18. I just got the ability to have credit cards again

and this little stint in unemployment isn't helping with the reestablishing credit thing I'm trying to do (these will be the only late payments I have but still). Oh well, I'll get back on track now that I have a full-time job (not a contract position that happens to be full-time).

[YarnAddict]

19. IMO,

people complaining about bank fees are the same as rich people complaining about taxes.

The fees you pay enable the banks to make loans to other people, so it is for the greater good.

Besides, the bank is trusting you to honor the obligation that you took on. I had a customer once who racked up a LOT of bad checks and overdraft fees. The bank continued to pay these items because she had a direct deposit. She opened a new account at a different bank, changed her direct deposit, and left us (a small community bank) stuck with hundreds of $$ in bad checks and unpaid fees. Fraudulent? Of course, but really not worth the time and $$ to prosecute.

[justiceischeap]

23. I disagree but that's okay, we're all entitled to our opinions

What did banks do before they had the policy of allowing overdrafts to pile up 'cause I know when I first started my checking account--before ATM cards--if you bounced one check, all the following checks went back to the retailer without payment then you got in trouble with the retailer and the bank wouldn't continue to pay those incoming checks. So how did they make loans then?