Banking, Credit 

Banks Cash Fat Checks First

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According to an article in USA Today, Citigroup, Bank of America, Chase, Wachovia, Wells Fargo, HSBC, U.S. Bank and SunTrust, eight of the ten largest largest banks in the united states, will cash checks that they receive on the same day in an order that maximizes overdraft possibilities. They will cash the largest checks first and the smallest checks last – this rule also applies for electronic transactions as well.

The banks defend their move by saying they want to give priority to the largest checks because they say that the larger checks are typically more important and you’d rather get a credit card payment bounced than a mortgage payment. Consumer advocates that banks are trying to screw the consumer because banks are relying on fees to make their money now that the spread is smaller. To be entirely honest, the order those checks are cashed shouldn’t matter – you should always have enough money in the bank to cover every check you write, otherwise you shouldn’t write them (whoops, typo, thanks Nick).

The articles goes on to explain the plight of Sean Tucker, 29, whose ego wrote checks (one of which was for $3.33) his body couldn’t cash to the tune of six overdraft fees and $200 out of his pocket. I’m sorry Sean… you need to be cognizant of how much money you have in the bank and you certainly shouldn’t be writing checks if you’re even close to being over, it’s simply not difficult to keep track of that stuff and if you’re simply careless, you deserve the fees so you’ll learn not to do it next time.

Personally, I prefer the checks cashed from the largest to the smallest because I’d rather have a $50 water bill bounce than my mortgage payment.

{ 21 comments, please add your thoughts now! }

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21 Responses to “Banks Cash Fat Checks First”

  1. marcus says:

    Clearly you’ve never been tight on funds, balancing tight income to just barely cover bills. Just because you were raise with silver spoons doesn’t make you some sort of genius to blame the check writers when banks have policies that hurt the truly poor, not just the “ego” check writer. Let’s keep that in mind while talking about narrowing spread. Is the bank’s main source of income now supposed to be off the backs of people with low bank balances? Sheesh, the multiple levels of stupidity implied in this post are appalling.

  2. walt says:

    guess marcus woke up on the wrong side of the bed….

  3. Matt says:

    I have to agree that I would prefer to have my smallest check bounced rather than the larger ones but I think that banks are capitalizing off things the example you gave. Bouncing a check for $3.30 and charging the a $25-30 charge for the bounce is a bit much. Banks need to come up with some realistic fee structures.

  4. samerwriter says:

    Yeah, this seems like much ado about nothing. One should assume that his check will be cashed the minute he puts it in the mail. The actual ordering in which the checks are cashed should be completely irrelevant.

    And frankly, I agree with their reasoning. I would much rather have my smaller checks bounce than my large ones. Even better, I’d rather none of them bounce.

  5. jim says:

    marcus: I was hardly born with a silver spoon in my mouth and i would think that anyone who was writing checks so close to their account balances would be even more diligent about their accounting – a $30 overdraft fee to someone as rich as I am hardly registers on the radar (i light my cigars with hundred dollar bills), while it would be brutal to someone who was poor. You shouldn’t write checks if your account doesn’t have the funds.

    (disclaimer: I don’t smoke cigars and I don’t burn money)

  6. Amber says:

    Personally, I’d rather see the smaller checks go through over the larger. Why? Because if I have one big check vs 10 small checks that might bounce, we’re talking one $30 charge vs ten $30 charges. But again, if you’re not smart enough to know how much money is in your account, and that your check won’t bounce, then you deserve whatever fees you wind up with. I’ve bounced my fair share in my time and its something I’m very dilligent about avoiding now.

  7. Jeremy says:

    As most others have said here, it is pretty simple to avoid bouncing checks regardless of what order they are cashed in. Just make sure you know how much your account has and write checks accordingly, and if that is something you can’t do, have some sort of overdraft protection.

  8. Foobarista says:

    The only time this has come up anywhere near me was when my brother, who was in college at the time, had a direct deposit not happen because his old company bounced its payroll. He had mailed his checks the night before, and because his rent check cleared first, about a half-dozen other checks bounced. His bank, of course, insisted on him paying the overcharges; by the time all was said and done, he had to pay about $250 in overdraft fees and late fees from the various outfits whose checks bounced.

    He did eventually get paid, and quit shortly before that company went belly-up. We helped him out with his late fees, and he’s now quite paranoid about making certain that direct deposits are funded before writing checks.

  9. John M says:

    Banks have policies that hurt the ignorant and the problem makers. Every once in a while most people run into some sort of checking problem (that is why overdraft protection was created). The fact is that it costs money for an financial institution to deal with overdrafts and customers who carry a low balance in their checking accounts are not profitable. Financial institutions do not have an obligation to fairly treat all consumers. Having a checking account is a privilege, it is not a right.

  10. John M, I have policies that hurt ignorant banks. The fact that it costs the bank money to deal with me is NOT my problem. The bank that complains about low-balance customers is compensated by these customers by cross-marketing to them, and by the occasional overdraft fee (or fee-avalanche). If they think they can accurately identify a poor customer, they should let that customer go – several of the online banks do this regularly.

    Financial institutions do have an obligation to make their policies known and enforce them evenly for all consumers. If those policies are also interpreted by smart and compassionate employees, so much the better!

    Having my business is a privilege, not a right. If they don’t want that privilege, other financial institutions do.

    That being said, I’m well-served by all the banks and credit unions with which I currently deal.

  11. julian says:

    Again I think the point that is missed is that banks play the odds. They know that the odds are for them that a large portion of america lives paycheck to paycheck. Its a fact of life. They play the odds that most people will bounce by one transaction and that by doing so they sort in their favor. Its not the amount of funds as so much as it is the transactions. I have shown in my blog that a $3 overdraft could result in over $100 in overdraft fees by my banks standards. BTW, most of your larger banks aren’t going to “bounce” most of your checks, they want the overdrafts and will hold your account in the red until they recieve the funds. Check sorting and fees are gravy scams on the part of banks that they use to make money over and on top of what they make from investments. That along with notification of the banks practices at the time you sign up for the account being non-existent.

  12. Chris says:

    I have worked on and off for banks over the years. From what I have seen it appears most overdraft fees really hurt the poorest and least educated the most. Banks have the ability to just return overdraft items instead of charging fees. It is true this costs money but in reality most large banks identify the people most likely to overdraft their accounts long before it ever happens. In effect, they prey on those that don’t know any better. With that said… I usually deal with banks and brokerages that pay me more my money and not the other way around. Fidelity comes to mind immediately. It seems companies that don’t charge lots of fees are more interested in helping people become rich and therefore making more money in the long run.

    • Barbara says:

      Chris, I appreciate your comment. You have not dehumanized those of us in difficult straits, unlike most at this site.

      My husband has become unemployed due to a recession he did not create. We do not play in the stock market. We pay our mortgage on time and have lived in a home we can afford for 21 years. We are upper middle class, with upper middle class values.

      Weighing the odds, there are times when I make a conscious decision to bounce a check. I view it as a necessary cost of living increase. I know I am not supposed to spend money I don’t have, but lately the timing is simply off. I have to weigh the odds because:

      1. My daughter is only going to walk to the podium once to receive her college diploma.
      2. Credit card companies charge me much more than banks when I do not pay my bills on time.
      3. I am expecting a check two days after a bill is due.
      4. I am waiting on promised money that is sitting in someone else’s account.

      Budgeting after four months without income is rather difficult.

      I will give you an example of how the bank procedure of paying the largest bill messed me up. I left a check for a service person on my desk while I attended my daughter’s graduation from college. The work was to be done on Friday and I knew the check would not be deposited until Friday evening.

      I flew to graduation and charged four items under $10 on my debit card- two were for water, as I cannot bring bottles of water past security. One was for checking a bag at United. I had promised my daughter I would bring a large bag so that she could pack it with her stuff. The fourth was frivolous. I bought a $3.95 NYC Taxi mug as a souvenir.

      When I returned home, I checked my online account and all four items were pending. As expected, the check did not appear. The next day, my household portion of my husband’s unemployment check was deposited and I checked my balance. It was negative even after the deposit.

      This is why:

      The check had been presented at the close of the day on Monday. On Tuesday morning, the transactions went through. Because the check was the largest, it was paid first but it was $5 short. All four debits bounced.

      I had expected to pay an extra $35, budgeted for it in fact. Instead, I paid $35 per debit which pretty much ate up my household budget for two weeks.

      I find many of the comments here insensitive. Yes, we should spend what we have. Yes, there are times when life gets in the way and we must manage in the best manner possible with the least negative impact. Yes, the middle class is the one holding the bag, more often than not.

      I am a good person who pays her bills, volunteers for the betterment of other’s children, make a minor imprint on the world. I do not find the judgments made here helpful to myself nor to the betterment of society.
      Judging others with a simple, all-encompassing response is not productive or compassionate.

  13. Terry says:

    It would help if Banks would let you pay the fee back within a certain period, say a month; this would help out those with tight budgets that
    would otherwise get slammed for $200 in fees and have to take it out of
    one paycheck. And yes there are plenty of us who unfortunately live paycheck to paycheck. This is not my choice. What I did financially as a 20 and 30 yr old has caused me and my family to live on a tight budget now.
    Biggest thing I did wrong…..charged !

  14. Charles Parker says:

    The flow of funds out of bank accounts has accelerated due to electronic
    check conversion at the cash register or lockbox, and faster processing of withdrawals
    brought on by Check 21, the new federal law that removed the “float” that some cashstrapped
    consumers took for granted.8 Although Check 21 accelerated the processing of
    withdrawals, time delays in processing consumers’ deposits were left in place, making a
    cascade of penalty fees even more likely.

  15. J says:

    Why I’m more intelligent banks explained in a few words:

    This should not be an issue at all because a bank should not charge a fee for a service it does not even render. If a check bounces it means the check was NOT paid, and returned to depositor. Thus the fee is venial, avaricious, and utterly fatuous.

    A bank should only be allowed by law to charge a fee if it honors the check thus putting the issuer’s account into negative status (as it’s a legitimate service and one that puts the bank at mild financial risk). There are only two ways to take money from someone without doing them a service in return: larceny and charity. Banks aren’t charities.

    For more rational, dissenting, and unorthodox views, check out my blog.

  16. J says:

    Wow. I may be more intelligent than banks but my proofreading skills are wanting today.

    I’m more intelligent THAN banks. Yes.

  17. J says:

    Huh. I may be more intelligent THAN banks but my proofreading abilities are in disrepair at the moment. Ah to have all the time in the world…

  18. Matt #2 says:

    Hard to believe some of you ignorant a**holes are sticking up for the poor Banks with their high interest rates,fee’s ect. These poor hold money that does not belong to them (costumers) lend it out and charge outrageous interest rates. I just love paying 3 times more than what my home cost also all the fees they charge for anything they can when you get your home loan docs. You people must have never had financial problems to where you had to do what you had to to make ends meet. We are the reason why the Banks are in business. Would be hare to keep a bank open without costumers. I’d like to know the amount Bank of America makes in just 1 day of overdraft fees. I’m sure it is in the millions. These Banks are out to screw people for as much money they can.

    • Vana says:

      I agree!
      Banks hate people without money or low balances. Late fees and bounced check fees are outrageous!

  19. Bill says:

    It’s condescending and sanctimonious to say you should have the money in the account. Mistakes do happen! My vendor drew an EFT a day early and 8 checks overdrafted because the bank paid them in the order that caused the most fees. It should be the opposite. They should pay the smallest first. Then there was the time when I was very young and very poor and deposited $100 cash in the night depository and them wrote 8 checks to pay bills. My $100 stolen and all my check bounced, again because of the opportunistic order they were paid.

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