| Modern banks have their roots in Western Europe. In | | | | the banks claim that the reason they do this is to |
| the old coffeehouses of London of the 16th century, | | | | prioritize larger transactions like mortgages that, if |
| loosely-organized moneychangers did business with | | | | rejected, might jeopardize the customer. However, |
| patrons. This went on until the London Royal Exchange | | | | many consumer advocates believe that banks are |
| was founded in 1565. Soon after, in the early 17th | | | | manipulating transactions for overdraft fees. |
| century, the center of trade (and therefore banking) | | | | If you believe your bank is doing this, here are some |
| moved to the Netherlands and evolved into what we | | | | things you can do: |
| know as banking today. | | | | 1. Keep an extra padding of at least $100 in your |
| Things have evolved quite a bit since those early days | | | | account at all times: |
| of banking. In the modern age, banks have come to | | | | This is probably the most failsafe way of avoiding |
| represent something solid and dependable - institutions | | | | overdraft fees due to transaction stacking. But, it's not |
| upon which the customer can depend. This is definitely | | | | easy for everyone to maintain, given the |
| the image that most banks' marketing staffs and | | | | unpredictability of life. |
| architects want you to perceive. It is for this reason | | | | 2. Link a backup savings account to your checking |
| that most banks - especially their headquarter offices - | | | | account for overdraft protection: |
| are located in imposing-looking structures made of | | | | Most banks offer savings accounts or secondary |
| marble or steel, while others are housed sky scrapers | | | | checking accounts that can act as reserves of sorts. |
| built to impress. | | | | When you overdraw your primary account, your bank |
| Indeed, banks have every interest in the public viewing | | | | can transfer money automatically into your primary |
| them as dependable, reliable places to put one's | | | | checking account. |
| money. That is why a recently-introduced practice | | | | 3. Watch your transactions more carefully: |
| called "transaction stacking" is causing such a stir | | | | This one sounds obvious, but it is also true: if you have |
| among consumer advocates. This is a deliberate | | | | the time, check your account balance twice per day. |
| method that banks engage in to increase your | | | | Within online access, this is easy. Remember: your |
| chances of incurring overdraft fees to your account, | | | | posted balance is not always your final balance, since |
| which means more profits in banks fees for the banks. | | | | it may not yet reflected checks that already show as |
| Here's how it works: say you have $50 in your | | | | being "paid." This is confusing and could throw off your |
| checking account. On that day, you make several debit | | | | calculations - so you will need to pay close attention. |
| charges, in this order: $2 for a pack of gum, $5 for a | | | | 4. Switch to a bank that does not charge for overdraft |
| cup of coffee, $8 for some office supplies, and $45 at | | | | fees: |
| the service station. If your bank processed these | | | | By far the simplest solution is to switch to a bank that |
| transactions in order, you would have to pay a single | | | | does not charge overdraft fees. There are few, but a |
| overdraft fee ($35, in the case of many banks). But, | | | | growing number, of banks who will actually cover your |
| with transaction stacking in play, your bank will | | | | charges even if you overdraw your account. But, even |
| purposefully process the transactions from largest to | | | | then they will NOT charge you an overdraft fee. |
| smallest, which means you would pay three overdraft | | | | Switching banks may sound like a pain, but doing so |
| fees (for the gum, coffee and office supplies | | | | could save you hundreds per year in fees. |
| purchases). That's $105 in charges vs. $35 if they | | | | Educating yourself about how banks really operate |
| hadn't engaged in this deceptive practice. | | | | "behind the scenes" can help you to manage your |
| According to a 2008 Consumer Federation of | | | | expenses and income in a smarter way, reducing the |
| America survey, most major, household-name banks | | | | fees you pay each month. |
| are manipulating transactions in this way. Of course, | | | | |