Pew Charitable Trusts recently released a report covering the consumer practices of many of the largest retail banks. The report showed that 50% of the banks don’t allocate deposits the way most consumers balance their checkbooks – chronologically. Instead of allocating deposits chronologically or from smallest to highest payments, these banks do the opposite, causing the worst damage. The banks order transactions to be paid from the highest to the lowest. This increases the chances that their customers will experience overdrafts and, consequently, also increases the banks opportunity to collect NSF fees.
Until consumer protection laws make the ordering priority mandatory and more consumer-friendly, what can consumers do to prevent from incurring unwanted overdraft fees?
- Read your bank’s disclosure rules that typically provides the bank’s ordering process
- Change how you balance your checkbook and, consequently your budget, to match your bank’s ordering process
- Opt out of overdraft coverage, so that purchases may be declined but you won’t get hit with unnecessary fees