Sounds like the beginning of a pitch for some get rich scheme, or be-your-own-bank rip-off, doesn’t it? But what I’m talking about today is a very sneaky and very real “trick” that some banks are using in order to generate more fees from those people who can least afford it.
Here’s how it works:
Some banks have changed how they process payables, and by payables I mean those checks or other types of transactions that pay funds from your bank account to other people or businesses. This type of processing, which for simplicity’s sake I’ll call payables batching, takes all of the payments your account pays out during the day into a single transaction, or batch. This batch is configured in such a way as to duplicate NSF fees whenever possible in order to generate NSF fees even when they are not truly earned.
The “magical batch” is configured to check the total amount of all withdrawals contained within the batch. This sounds innocent enough, but when you look at the details, you begin to see that the devil truly does exist there… If the sum total of the batch being processed takes your account below $0, each and every transaction within that batch generates its own NSF fee.
Let’s walk through an example: You have $500.00 in your account today and you don’t have time today, so sometime around noon you drive up to the ATM on the outside of your bank and make your deposit of $650.00. At the end of the day, your payables are processed; this is mostly checks that cleared during the day because other electronic types of transactions such as using your debit card are recorded live. The batch being processed is for $515.00, so the bank checks the batch amount against your available balance… Oh yeah, forget about your ATM deposit, because those are recorded last at the very end of the day after the payables are finished. So the batch is processed as a whole which brings your balance to -$15.00. Now if you have overdraft protection, you are instantly charged a fee (let’s say $23.00 in this instance) and since 7 checks cleared today, you now have a balance of -$176.00. After they have deducted their fees, the next process begins; yup, your ATM deposit!! Yeah! Now your account balance is back in the black where it belongs, but instead of having a balance of $635.00, your account has been automagically sucked down to $474.00.
In this example you’ve been hit with the double-whammy; your account has been drained of $176.00 in overdraft fees even though 6 of the transactions included in that batch could have been paid with the existing account balance, but because the bank has designed this process to generate unearned NSF fees, you get soaked for 6 NSF fees you never incurred.
As if that isn’t bad enough, the one NSF fee they could have legitimately charged could have also been avoided completely if the ATM deposits were recorded at the time you made the transaction instead of at the end of the day when it does you, the customer the least amount of good.
Getting angry yet?
How about the fact that this kind of tactic mostly targets those who are struggling to get by, when the difference between one and six NSF fees makes the difference between paying or defaulting on your rent that month? Banks play that bottom margin like a fine violin, scraping a few extra dollars off the backs of the poor without skipping a step and just in time for that executive performance bonus at the end of the year…
The “Magical Mystery Batch” continues to be used by banks, even after customers point out that the practice is unethical and illegal. It just works so well, and many people don’t even change it…
Just my view, from the cheep seats; a cheep seat at the teller window of a bank with a penchant for mystery and magic…
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