Banks Reorder Your Charges So That The Bigger Charges Are Taken Out First

October 6, 2009 at 2:48 pm | Posted in American politics | Leave a comment

I was right when others mocked me, but lookey here, banks are making a fortune on their customers’ ignorance of how banks do business.

First, banks, recognizing the profit-churning potential of overdraft fees in recent years, have grown more sophisticated in their methods of triggering them. Some, for example, will reorder debit purchases by amount, rather than chronology, in order to maximize the number of overdraft fees slapped on consumers.

So let me do the example again. Let’s say you go on vacation over a weekend. You have $1000 balance in your account. You first pay $35 for breakfast. Then $10 for batteries for your camera. Then $10 for drinks. Then $5 for snacks. Then $50 for lunch. Then $100 for dinner. Then $35 for gasoline. Then finally $800 for your hotel.

Now, let’s say the bank receives these items in the same order that you charged them. You’d think the bank would then take out from your account chronologically, because that’s how you charge. So let’s do the math and see what happens.

$1000 – 35 = $965
$965 – 10 = $955
$955 – 10 = $945
$945 – 5 = $940
$940 – 50 = $890
$890 – 100 = $790
$790 – 35 = $755
$755 – 800 = -$45

So, you went over by $45 with the final transaction. Because you went over, the bank will charge you a fee for each transaction that went over. In this case, if the bank were to charge your account in the order they receive the charges (chronologically), then they would charge you for only one item that went over, the $800. So your ending balance will be:

-$45 – 30 = -$75

Now compare with how banks actually do this:

$1000 – $800 = $200
$200 – $100 = $100
$100 – $50 = $50
$50 – $35 = $15
$15 – $35 = -$20
-$20 – $10 = -$30
-$30 – $10 = -$40
-$40 – $5 = -$45

Did you catch the difference? Instead of only getting charged on the overdraft for one item, you are now charged for FOUR. So your real new ending balance is:

-$45 – 30 – 30 – 30 – 30 = -$165

Or a difference of $110 that your bank made off of you by simply reordering the incoming charges. Nice eh?

Banks really really don’t care about their customers. They are actually thieves who rob us while we are not paying attention. This right here is thievery. Plain and simple.

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