Is it legal for a bank to rearrange the timing of your transactions?

Question

My daughter is 17 and learning how to maintain a checking account... the hard way. I've noticed that our bank collects transactions received by them daily. The actual occurance of the transactions can range in date from 1-5 days. Instead of posting them in order according to the date they were transacted, the bank posts them in order from largest amount to smallest. What this does for the bank is give them more opportunities to apply overdraft fees, if there are to be any. What this does to the consumer is charge them more overdraft fees than should be. The bank is rearranging the timing of withdrawals and charges to their advantage, subjecting the consumer to much higher fees than one would or should expect. Is this legal?

Answer 1

I doubt the bank is rearranging withdrawls ... however several things could be happening.
If you are using a debit/check card those transactions can take 1-4 business days before showing up on your account.
Another explination is if the bank is placing deposits on hold. In this case your balance could be deceptive as to what is actually there to be used.

Hope this helps.

Answer 2

I'm sure it is legal - after all, they are posting them AFTER the transactions are made, correct? Technically, the money should be in there before you make the transaction. But if you are saying that she writes a check for $100 on Wednesday the 11th and they are taking it out on Tuesday the 10th, then that is illegal. But as long as they take them out the day of the transaction, it is legal. The money should be there before the check is written, or else they have the right to bounce it.

Answer 3

This is perfectly legal. Make the deposit, THEN write the check. Nobody who keeps responsible records should ever have to pay an overdraft fee. Let this be a lesson to your daughter. When checks are processed, the bank has no way of knowing when the check was written as this is not encoded on the check.

Answer 4

Yes, that is listed in UCC-Uniform Commecrial Code. The reason behind it is they try to process the largest sums first because that may be more important payment for the account holder-like mortgage, instead of smaller payments, like groceries or credit card payment. Basically they would try to process your large payments first so if possible they don't bounce. It is for the advantage of the client. Plus your daughter should start learning not to write or take more money out of her account then what she has physically in. That way she will never be on negative and she will never have to pay a penny for overdraft fees.

Answer 5

Every bank I ever dealt with always runs them in the order received. They can not run them before they get them. When I did ask my bank officer why they ran the largest first, they said that it is assumed that those are more likely bill payments and they hate to send them back. The real lesson here, though, is simple. DO NOT WRITE A CHECK IF YOU DO NOT HAVE MONEY IN THE BANK.