If you’ve got a chequing account here’s something that’ll be of interest. And since that’s almost 99% of us, it’s worth knowing:

A number of U.S. banks have recently purchased some special software to use for their computers. This software is designed to maximize N.S.F. charges on accounts.

Now before we go any further, I have no clue if any Canadian banks have similar software. I have no reason to think they do or to think they wouldn’t be interested in it.

This was a report on the Atlanta based Clark Howard show two weeks ago, and it’s pretty scary. Let me explain: Let’s say you have $500 in your chequing account and there are a number of cheques that you’ve written. You’ve written 6 cheques for $50 each and one big one for $460. That’s a total of $760, so there’s going to be an N.S.F.

Don’t get judgmental right now, because stuff does happen, or banks wouldn’t be making billions in N.S.F. charges. Sometimes it’s carelessness, sometimes it’s as simple as not realizing that a deposit had a hold on it before writing cheques on the money.

Now logic in this example says put through the six small cheques for $50 each and bounce the big one. That’s one N.S.F. fee, now about $42. But this software is designed to get the most service charges out of the account. So the software works out that the $460 cheque should get cleared because then the six cheques for $50 each will all bounce!

So instead of one N.S.F. charge, that U.S. bank can charge six times $42 or $252 in service charges and it’s all legitimate.
In fact, one caller walked through, and documented this type of scenario and had $580 in service charges in one day, where it could have been $70 or so if the order of clearing the cheques had been done in his favour from smallest to largest.

No, this is not a reason to get an overdraft. Quite the opposite, since they just charge a lot of service charges and high rates on a permanent basis. I don’t even care if banks make a ton of profit, I just don’t want them to make it all from your listeners or anyone who uses the tools out of the It’s Your Money book.

(for US IYM: file complaint with the Office of the Controller of the Currency. Occ.gov!!