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Bank Accounts - Overdrafts


I wrote a check that was returned because of insufficient funds (NSF) in my account. But the bank never notified me, so other checks bounced and I got hit with several overdraft fees. Shouldn't the bank have sent me a notice?

The bank is not required to notify you when a check bounces. You are responsible for keeping a current and accurate check/transaction register. By balancing it with your monthly statement, you will know your account balance and prevent overdrafts.

State laws generally provide that it is illegal to write a check—knowingly or negligently—without having sufficient funds to cover the check on the day you write it.

What is overdraft protection?

Overdraft protection is an agreement with the bank or financial institution to cover overdrafts on a checking account. This service will typically involve a fee and be limited to a preset maximum amount.

How can my account be overdrawn when I just made a deposit?

Many transactions are processed overnight. These transactions may not be reflected in an available balance.

Thus it's important to keep a current and accurate check/transaction register and balance it to your monthly statement. A bank's online, telephone, or ATM balances are for information purposes only—they do not replace your check/transaction register.

On checking accounts, banks generally post deposits before withdrawals. However, there are no laws requiring national banks to do this. In addition, banks may establish a cutoff time for deposits made at a branch or through an ATM. Deposits made after that time may be treated as having been made on the following business day.

For example, a deposit made after the Friday afternoon cutoff time would be treated as if it were made on the following Monday. So any items with next-day availability would then be available the next day (Tuesday).

Why did the bank pay the check/debit when my account was overdrawn?

National banks can either return the check unpaid or advance sufficient funds to your account to pay the check or debit item. In either case, your bank can assess an insufficient funds fee against your account.

Is my bank permitted to charge me an overdraft fee as well as a fee for each day during the period my checking account is overdrawn?

Yes. Banks are allowed to charge fees for returned checks and overdrawn balances. The assessment of account fees is governed by the terms of your deposit account agreement, which you should have received when you opened the account.

Review your account agreement and contact the bank for more information.

Can the bank charge an overdraft fee while there is a deposit pending?

Yes. Many transactions are processed overnight. These transactions may not be reflected in an available balance.

This is why it's important to keep a current and accurate check/transaction register and balance it to your monthly statement. A bank's online, telephone, or ATM balances are for information purposes only—they do not replace your check/transaction register.

On checking accounts, banks generally post deposits before withdrawals. However, the law does not require this. In addition, banks may establish a cutoff time for deposits made at a branch or through an ATM. Deposits made after that time may be treated as having been made on the following business day.

For example, a deposit made after the Friday afternoon cutoff time would be treated as if it were made on the following Monday. So any items with next-day availability would then be available the next day (Tuesday).

The bank charged $34 for an overdraft, which seems excessive. Is there a limit?

Federal laws do not establish maximum amounts for fees that national banks can charge on your account. These decisions are made by the bank—and in some instances, are prescribed by State law.

National banks are required to disclose any fees when the deposit account is established. Review your account agreement with the bank as well as any current fee schedule.

If you feel that your bank's account fees are too high, do some comparison shopping for your banking services.

My bank paid my largest check first and then the smaller ones. Doing so created more overdraft fees on my account. Why did the bank pay in this order?

You may write your checks in numerical order, but that doesn't mean the bank will post them that way. The same is true with point-of-sale or other electronic transactions: They don't necessarily post in the order in which you made the purchases.

When several items come to the bank for clearing, it can choose to debit them from your account in several ways. Many national banks are opting to post the largest dollar items first instead of posting the checks in numerical order. Often the largest check represents payment for rent, mortgage, car payments, or insurance premiums.

If your bank adopts this policy throughout its territory, it normally will notify you via your statement.

The bank's ATM indicated that I had a positive balance. But when I wrote a check, the bank charged an overdraft fee. How is this possible?

Many transactions are processed overnight. These transactions may not be reflected in an available balance, such as an ATM balance, that you see during the day.

This is why it's important to keep a current and accurate check/transaction register and balance it to your monthly statement. A bank's online, telephone, or ATM balances are for information purposes only—they do not replace your check/transaction register.

On checking accounts, national banks generally post deposits before withdrawals. However, banks aren't required by law to do this. In addition, banks may establish a cutoff time for deposits made at a branch or through an ATM. Deposits made after the cutoff time may be treated as having been made on the following business day.

For example, a deposit made after the Friday afternoon cutoff time would be treated as if it were made on the following Monday. So any items with next-day availability would be available on Tuesday.

How many times will a bank allow an insufficient funds check to be redeposited/resubmitted?

Generally, a national bank will redeposit the check twice. However, there are no laws that determine how many times a check may be resubmitted.

I deposited a third-party check and spent some of the funds. My bank has now informed me that this check was insufficient (NSF) and that I am liable for the entire amount. Is this correct?

Depending on the circumstances and your State's laws, you may be held responsible for the entire amount of the check that you cash at the bank or deposit into your account.

If your bank credited your account for a check that was later found to be insufficient, the bank can reverse the funds. As the payee you must pursue the maker of the check for restitution.

A tip that can help avoid this scenario: Use caution when accepting a check from someone you don't know.







Copyright 2007 by Mark McCracken , All Rights Reserved