Stacking: How Banks Cash in on NSF Fees.Fitness Equipment
How many of you have scolded your young adult children for overdrawing their bank account and incurring non-sufficient fund fees? "Damn it Gavin! That cheeseburger you just had to have, just cost you forty bucks! I hope you enjoyed it!" How many of you have used your ATM card to buy $20 worth of gas only to find out that it ended up costing you $60 for that little bit of overpriced petroleum? It's happened to me and to my adult children and the fact is... It's perfectly legal. You see, when times get tough... banks make money... and according to the law, there is nothing wrong with it. After all, it's kind of like having an instant line of credit for a fee. In exchange for paying, and not declining that $1.29 charge for a cheeseburger that your child didn't have enough for in his account, the bank gets forty bucks. Okay, You scold the kid and he becomes more careful with his purchases, but the cheeseburger vendor gets paid and you keep your good name and are saved the embarrassment of a declined purchase for $1.29. It's all good. When does this practice become wrong? Not only wrong, but down right thievery.
STACKING YOUR CHARGES
There is a little known practice in the banking industry called stacking. The banks will deny that they do it. They will say that they have always processed checks or check card swipes this way, and they will deny any wrong doing but they are stealing from each and every person who is fighting to stay above water in this poor economy.
How do they do it? It's simple. Let's say that you sit down Sunday night to pay your bills. You have $2000 in your account. You pay the electric bill $150, cable, $75, visa $100, Master Card $100, telephone $100, Mortgage $1,100, Auto insurance $200 and car payment $250 Total bills = $2,075. You're over the limit by $75. You know, however that these bills aren't all going to clear at once and so you have a few days to try to get the extra $75 in the bank. Monday comes and you stop at dunkin' Donuts for coffee and a bagel, you use your debit card for $3.79 and you stop at the gas station and put $20 worth of gas in your tank. Now you are over your limit by $98.79. You know you're going to get an NSF fee, which is acceptable. After all you are over the limit and you needed to pay all those bills. But, unfortunately, this is how things pan out. Your bank will not process transactions immediately as they come in. Nor will they process them in the order that they come in. Let's say all the small transactions come through first. Electric bill $150, cable, $75, visa $100, Master Card $100, telephone $100, auto insurance $200 and car payment $250. And don't forget Dunkin Donuts $3.79 and gas $20 and say your mortgage for $1100 comes through last, first or somewhere in the middle. Total $2098.75. Invariably your bank will process the highest check first, and then process each check with the highest amount next. By using this method, this is how things work out: $2000 bal. - Mortgage -$1100 = $900 - car payment -$250 =$650 - insurance -$200 = $450 - electric -$150 =$300 -visa $100, MasterCard $100 and telephone $100 bal = $0 Next comes the cable bill $75 which they pay and you get a NSF fee of $35 then your $20 worth of gas...$35 NSF fee and then Dunkin Donuts $3.79 and another $35 NSF fee. These fees total $105 and then they will tack on another $5 for each day your account remains in the negative. So at the end of the day you're out $110 + the $98.79 that you are in the negative. This process is what is known as stacking and it will happen this way every single time. Had the bank run all those transactions in reverse and paid all the smaller bills first you would still end up with one NSF fee for the mortgage $35 plus the $5 fee for your account being in the negative and the $98.79that you are in the red. The difference is $70 you would have saved. This practice translates to huge profits for the bank and is probably why when the economy was at its worst, the only people building were the banks.
When I questioned my bank about this, they will said that it has always been their policy to run checks this way and that if I had a problem with it I should get some people together and form a class action suit.
For the average person with a regular weekly income who has to decide whether to repair the brakes on their car or to pay their cell phone bill these additional fees can be crippling. For a business owner these fees can be considered the cost of doing business while he or she tries to cut costs and they can amount to many thousands of dollars. For those of you who are nodding your heads at this moment and have yourselves been victims of these predatory bank practices, I encourage you to take action.
REVIEW YOUR STATEMENTS
Go back through your last 12 months of statements and figure out how much you were charged each month for overdraft fees. This alone should at least open your eyes. Most banks have online banking so you should be able to check your statements that way if you don't have your paper statements. Your goal after figuring this out should be to become extremely diligent in tracking your account balance. If the money isn't there don't use it! Remember, what you think might only cost you one overdraft fee could end up costing you much more. It wasn't until I sat down and really studied my bank statements that I realized what they were doing. If my bank had processed transactions highest first, I would have saved thousands of dollars
TALK TO YOUR BANK
When you catch your bank stacking approach them about it. Show them dates on the checks and when they were processed. Insist that they return at least some of these fees because of the unfairness of the practice. Remember, the squeaky wheel gets the grease. Be prepared for the fact that your bank may shrug their shoulders and do nothing. If you complain enough they may return some of your fees. If these practices continue, change banks. Credit unions are less likely to stack you and may be a good option compared to a larger bank.