Sounds like the beginning of a pitch to some get-rich scheme, or do-your-own-bank scam, doesn’t it? But what I’m talking about today is a very sneaky and very real “trick” that some banks are using to generate higher fees from those who can least afford it.
This is how it works:
Some banks have changed the way payables are processed, and by payables I mean checks or other types of transactions that pay money out of your bank account to other people or businesses. This type of processing, which for the sake of simplicity I’ll call payable batching, takes all the payments made by your account during the day into one transaction, or batch. This batch is configured in such a way that NSF fees are duplicated to generate NSF fees whenever possible, even if they are not actually earned.
The “Magic Batch” is configured to check the total amount of all withdrawals contained within the batch. It sounds innocent enough, but when you look at the details, you start to see that the devil is indeed out there… If the total of the batch being processed takes your account below $0, So each transaction within that batch generates it’s own NSF fee.
Let’s go through an example: You have $500.00 in your account today and you don’t have time today, so sometime this afternoon you walk up to the ATM outside your bank and deposit $650.00. At the end of the day, your payments are processed; These are mostly checks that get cleared during the day as other electronic types of transactions like using your debit card are recorded live. The batch being processed is for $515.00, so the bank checks the batch amount against your available balance… oh yeah, forget about your ATM deposits, as they end up due at the end of the day are recorded. So the batch is processed as a whole which brings your balance down to -$15.00. Now if you have overdraft protection, you are charged immediately (let’s say $23.00 in this example) and since 7 checks cleared today, you now have a balance of -$176.00. After deducting their fees, the next process begins; Yes, Your ATM Deposit!! Yes! Now your account balance is back in the black, but instead of having a balance of $635.00, your account is automatically reduced to $474.00.
In this instance you are hit with a double whammy; Your account has been debited for $176.00 in overdraft fees, even though the 6 transactions included in that batch could have been paid for with an existing account balance, but because the bank used this process to generate unearned NSF fees Designed, you get drenched for 6 NSF fees you never charged.
As if that’s not bad enough, an NSF fee that they could legitimately charge could also be avoided entirely if the ATM deposit was entered at the time you did the transaction, not the day after. In the end when you do this, at least the client is good.
Getting angry yet?
How about the fact that this type of strategy mostly targets people who are struggling to make ends meet, when the difference between one and six NSF fees is enough to pay or default on your rent that month. makes the difference between Banks play that lower margin like a fine violin, splashing a few extra dollars on the backs of the poor, without missing a step and just in time for that executive performance bonus at the end of the year…
The “magical mystery batch” continues to be used by banks, even after customers point out that the practice is unethical and illegal. It works great, and many people don’t even change it…
Just my view, from the cheep seats; Cheep seat at the teller window of a bank with a penchant for mystery and magic…
