Why did that go through?
August 13, 2012 6:37 AM   Subscribe

Using funds from still-uncleared checks?

On Friday I deposited some checks into an otherwise empty checking account. Normally I would not have tried to do other transactions against these checks, thinking I needed to wait at least till Monday as per my bank's funds availability disclosure.

But I did not realize I didn't have any other money in the account. So I did attempt some transactions.

To my surprise, certain transactions cleared (debit card with signature at several different points of sale), while certain did not (various internet efforts).

What gives? Debit card with signature is OK against funds waiting to clear?

I will ask my bank, too, of course, but it is not nearby and has poor phone customer service. So I thank you for a word or two meanwhile.
posted by skbw to Work & Money (12 answers total) 1 user marked this as a favorite
It is possible that it's not the nature of the transactions, but the amount. When I deposit a check, the bank usually immediately releases a portion (I think it's always $100, but I am not sure), and then releases the remainder on the next business day (or for however long the hold lasts, if there is a hold). So, it's very possible that's what happened here - the point of sale purchases were within that range, and then your internet efforts were not.
posted by pazazygeek at 6:39 AM on August 13, 2012 [2 favorites]

If you don't explicitly tell them not to, banks will often process debit card charges even if it overdraws your account, and then charge you huge overdraft fees. I would call them ASAP to make sure this is not happening to you.
posted by something something at 6:40 AM on August 13, 2012 [2 favorites]

If you check your available balance, I'll bet that you'll see that some - but not ALL! - of the funds are immediately available. With many of the banks I've used, they'll make some small amount (say, 20% or $200 or so) immediately available, with the rest to be made available when the checks clear.
posted by julthumbscrew at 6:41 AM on August 13, 2012

Several small stores that I use a debit card at (requiring a signature, rather than a PIN) don't post transactions until the next day. I've noticed that these stores are usually rather "low end" and assumed it was some sort of cheap credit card processing account.
posted by cedar at 6:57 AM on August 13, 2012

Some card-with-signature transactions get saved up and processed in a batch at the end of a business day. I quite often see a held amount appear in my online bank statement the day after I've paid for something with my Visa debit card, and have to wait yet another day before the holds turn into proper transactions and affect my account balance.

So it's not that debit card with signature transactions are valid against uncleared funds per se; below a certain amount they're just always assumed valid regardless of the state of the account they're nominally debited against.
posted by flabdablet at 7:03 AM on August 13, 2012 [1 favorite]

Response by poster: Clarifications:

(1) No, the first $100 that is available until the checks clear only showed up today, next business day, as per usual. At my bank I do not get same day availability UNLESS there is $ in the account to cover it if the deposited checks turn out to be bad, and there was no money in the account.

(2) The transactions in question DID post the same day--I checked once I got home (from the grocery, etc.) and found the internet transactions didn't work.
posted by skbw at 7:03 AM on August 13, 2012

This doesn't directly answer the question but, if you can, you should get yourself a credit card and use that instead of your debit card. As long as you pay it off in full every month (or after every payday if you so desire) you'll never pay interest and you won't have to worry about these little logistical issues.

What time on Friday did you deposit the checks? Was it with a teller or the ATM? If it was before they cut over to the next business day you might have had the deposit post on Friday's business and then been operating on Monday's business day all weekend (and had access to the first $100). It might be that your bank's internet banking is quirky in some way that it didn't show you the $100 available balance.

My other guess is that you overdrew your account and their system rejected some transactions but not others for reason that only that bank's risk management department could tell you. You'll find out tomorrow if you have a bunch of overdraft fees.
posted by VTX at 7:43 AM on August 13, 2012

"At my bank I do not get same day availability UNLESS there is $ in the account to cover it if the deposited checks turn out to be bad"

Then how is it same day availability? Are you saying you could have $100, deposit a check for $100, and go spend $200? Or spend $100?
posted by jesirose at 8:18 AM on August 13, 2012

It went through, presuming you're in the US, because you told your bank to authorize overdraft transactions on your debit card when presented as a credit card. I believe it was FACTA that required banks send all debit card bearing customers an opt-in form to that effect sometime last year.

If you didn't opt in, your bank screwed up. Note that PIN based transactions cleared over the ATM network, like withdrawals at an actual ATM are different and can overdraft your account without the aforementioned opt in.

Whether or not you'll incur overdraft fees depends entirely on your specific bank. My bank processes deposits before everything else, so even if I had a zero balance, charged the full overdraft limit on my account on Saturday, then deposited a check by 7PM local time on Monday, I'd have no overdraft fees presuming there was no hold on the check.

With other banks, you could deposit a check Monday morning, overdraft Monday afternoon, and get charged a fee. It's entirely up to them which order they process deposits in.

I would hope that since you deposited on Friday you should be fine on that count, but I don't have your account disclosures at hand.
posted by wierdo at 8:29 AM on August 13, 2012 [1 favorite]

One other thing is that point of sale purchases are often "pending" transactions. My card will decline if the money isn't in the account, but as flabdablet points out, not all accounts do this. You may wind up even more in the hole tomorrow AM if that's what's happening - I would call the bank immediately and see what you can do. Sometimes you can get the fees waived if you talk to a sympathetic manager. Or at least some of them.
posted by pazazygeek at 8:53 AM on August 13, 2012

If you don't explicitly tell them not to, banks will often process debit card charges even if it overdraws your account, and then charge you huge overdraft fees. I would call them ASAP to make sure this is not happening to you.

This is generally how it works. YOU are in charge of not overdrawing your account. Like with paper checks, they can't stop you from writing anything you want on it.

The US retail/POS banking system is almost universally NOT "online". When you swipe your card, it isn't calling your bank and checking if you have money available. It's just collecting the number and will be submitting the transaction as a batch later.
posted by gjc at 10:26 PM on August 13, 2012

gjc: "The US retail/POS banking system is almost universally NOT "online"."

That's not true at all. Most every company I deal with that has a card machine most definitely does online authorizations. The batches, which actually take the money from your account rather than just removing it from your available balance, are usually only done daily at best. That depends entirely on the merchant. The processors I've dealt with give the merchant 14 days to settle an authorized transaction.

I can see the authorization on my bank's website within a couple of minutes at most. It takes up to a few days to convert into a real transaction, though. If the gas station, to pick an example, sends their batches at 11PM every day, it doesn't get settled until after the end of the next day. My bank also processes transactions in batches at the end of their business day, so it'll be yet another day from the time the gas station's batch settles with their processor. So I charge at 11:30 Monday and have an authorization sitting around until Wednesday evening when it finally clears.

The ATM network, on the other hand, is usually instant in the sense that the settled transaction is presented to my bank immediately.

We may be terribly backwards in the credit card department, but authorizations are almost always processed in real time now and have been for some years.

Some seemingly respectable banks are actually very shady and charge overdraft fees based on the authorization itself, but they don't all do that and anyone saddled with such a horrendously anti-customer policy should switch banks. No money leaves the bank's coffers until settlement, so charging you an overdraft fee on an authorization is very much akin to charging you an overdraft fee because you're thinking about spending money sometime next week.

Anyway, by law, the onus is most definitely not on the account holder to avoid overdrafts when using a debit card cleared over the credit network unless they have specifically opted in to such treatment. The bank is required to decline the transaction unless the account holder has opted in to overdraft protection applicable to debit card transactions cleared over the credit network.

Note: My earlier reference to FACTA was in error, I actually meant the EFTA, as implemented by Regulation E.
posted by wierdo at 11:19 PM on August 13, 2012

« Older Stick with Flickr Pro or go with ????   |   The music, it washes over me Newer »
This thread is closed to new comments.