Understanding Bank Processing to Avoid Fees

Most people have bounced a check at some time in their lives. Whether it was done in error or purposely, consumers who have had this happen learned an expensive lesson at the time. Both the bank and the merchant that received the returned check charge hefty fees to the customer that wrote the bad check, making the presumably low cost purchase turn into an expensive nightmare.

Obviously the best way to avoid being assessed overdraft fees by your bank and returned check charges by a merchant is to not write bad checks. By carefully planning your spending and balancing your checkbook regularly, you can avoid the cost and embarrassment that writing a bad check can cause. Avoid playing the “check floating game” wherein you write a check to the grocery store on Tuesday in the hopes that it won’t clear the bank until Friday when you know you’re direct deposit will be in. There have always been too many variables in this game and the “Check 21” law that went into effect in 2004 has sped up check processing considerably. It’s never a good idea to write a check unless you know the money is in the bank.

Bank customers should also make an effort to understand their bank’s methods of processing. Most banks present checks and debits in order from highest amount to lowest. There are two reasons for this, the one they will tell you if you ask, and the real one. What they’ll tell you is that they process this way so that high dollar items like your rent or mortgage check will clear while something minor like a check to the grocery store is returned. The real reason is that the bank makes more money when multiple items bounce. If they can charge you five fees instead of two, they will. Some states have even altered their banking regulations to require that banks process from lowest amount to highest, but they are still in the minority.

Ultimately the activity in your checking account is your responsibility and the best way to avoid overdraft fees is to monitor that activity closely. Take responsibility for yourself and your actions and, if you do bounce a check, don’t blame the bank. Blame yourself, and then make it right with the merchant who effectively didn’t get paid. If you don’t make a habit of overdrawing your account, the bank may refund their fees at least once.

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