"Banks use a variety of methods to process and post checks. The American Bankers Association is a group that represents banks. Others have no overdraft fees on items under a certain amount like $5 or less, for example. The number of times a bank will charge you an overdraft fee also varies by institution with some able to charge 12 per day. That would the bank to collect and overdraft fee two times instead of one. Since most banks will process largest to smallest transaction the $40 book is deducted first leaving the student with $10 then the three $10 transactions are deducted. You decide to swipe your debit card anyway under the assumption you’ll be charged a $35 overdraft fee just once. That leaves you with $20, but you still need to buy a $40 book for class that evening. You make 3 consecutive purchases for $10 each. Here’s an example: Say you’re a student with $50 in your account. Why does any of this that matter? Because the number of overdraft fees charged could vary drastically depending on how the transactions are ordered. Other times a bank can order one sub-batch high to low but another sub-batch low to high. In its report today the CFPB says there are actually several ways banks order transactions with some processing larger transactions first and others processing certain types of transactions first. ![]() The CFPB will examine how prevalent this practice is and how it impacts consumers," the agency said last year. "This maximizes the number of transactions that will trigger an overdraft fee. One practice it said it would look into is the processing all checks, bill payments, debit card transactions, and ATM withdrawals each day by the largest transactions first. The CFPB launched its inquiry into overdraft fees last year when it said it was concerned that overdraft practices used by some financial institutions increase costs to consumers. The record was hit in 2009 with $37 billion in overdraft fees collected by banks. In 2012, banks took in $32 billion in overdraft fees up $400 million from the previous year. ![]() Overdraft fees are a big source of revenue for banks. The order in which sub-batches are processed can affect which items – and how many – incur overdraft or non-sufficient fund fees when an account with a positive balance does not have sufficient funds to pay all of the debits in all of the batches," the report notes. Banks' policies vary widely "regarding what types of debits are grouped into sub-batches and the sequence of the sub-batches.
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