Q: My complaint is against my bank, but this appears to be a problem involving many banks in this country. In the past year I have been assessed more than $2,000 in unfair nonsufficient...

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Q:

My complaint is against my bank, but this appears to be a problem involving many banks in this country.

In the past year I have been assessed more than $2,000 in unfair nonsufficient funds (NSF) fees from primarily electronic-debit transactions.

I will admit that some are probably due to mismanagement on my part. But I think that much, if not most, of it is due to a questionable accounting practice used by the bank. I believe the bank uses an unfair and unethical accounting method when processing debits/credits to a person’s bank account at the end of the business day.

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Here is what they do. They process debits to an account from highest to lowest, regardless of the order received. Then they process credits.

This method assures that a person’s account balance will go into a negative balance a lot sooner, so the bank will be able to assess more NSF fees.

I can’t understand how they can do this to their customers, but from what I understand they are doing this on a wide scale. A more ethical and fair method would be to process credits first and then subtract the debits. I feel this needs to be corrected.


A:

You are paying attention to the wrong thing. If your bank balance is so low that the order in which debits and credits are processed in any single day can trigger insufficient-funds fees, you should change your bank-use habits and have a larger balance.

When you make a deposit from another bank, it may take time for the funds to clear.

If you want to make withdrawals against that deposit on the day you make the deposit, you are, in essence, borrowing money from your bank. It pays out real cash to you but must wait to collect real cash from your deposit.

With $2,000 in fees, assuming an average fee for insufficient funds of $25 (the range is $20 to $35), you’ve had 80 transactions, nearly seven a month, that take your bank balance below zero. I’m sure you don’t want to hear this, but you’re the problem, not the bank.

Basically, you need to figure out a way to avoid running so lean. I’m sure you don’t do your best to keep your car running on empty every day of the week, so why do it with your bank account?

One method many people use is to have a balance in their checking account that they don’t count: i.e., they have an extra $500 or $1,000 in their account that they don’t count in their checkbook register. As a practical matter, it’s a good idea to keep one month of your after-tax wages in your checking account.

Just as you have to leave some money in your checking account, you should also start planning ahead for your cash needs.

You need to start thinking ahead, making estimates of what your cash needs are, and use the ATM accordingly. Many people do only one or two ATM transactions a month.

One of the very nice side effects of having a larger bank balance and planning your cash use is that you will enjoy having more control over your life. This is something you have to do, not the bank.

Questions about personal finance and investments may be sent to Scott Burns at The Dallas Morning News, P.O. Box 655237, Dallas, TX 75265; by fax at 214-977-8776; or by e-mail at scott@scottburns.com. Questions of general interest will be answered in future columns.