It's a policy banks love and bank customers hate: That is, the big banks' universal practice of jumping the largest checks, debit-card transactions and ATM withdrawals to the front of the processing queue, even if other smaller transactions occurred earlier in time.
Banks say this reshuffling ensures that customers' largest, and thus presumably most important, payments, such as rent checks, get first priority.
That may be true, but it's also the case that this reshuffling generates more overdraft fees on customers' accounts. If smaller transactions are processed first and an account is depleted, only one larger transaction would generate a fee. But if the one large transaction depletes the funds, overdraft fees of $20, $25 or $35 are multiplied by all the smaller transactions processed later. That way, the fees can total $100 or more.
A federal judge recently hit one large bank with an order to refund $200 million of overdraft fees to customers. The bank intends to appeal the ruling.
Banks may be excused for their greedy policies as they are, after all, in business to make money. And yet, customers likewise may be excused for their strenuous objections.
Because the real problem isn't the policy, but rather that customers aren't given fair, proper, reasonable and understandable disclosures of how the reshuffling works, so they can protect themselves from the negative consequences.
If customers received such disclosures, they'd be able to manage their accounts to avoid these fees. But because the disclosures are buried in pages of small-print legalize, customers are at a great disadvantage. Of course, fair disclosures would defeat the banks' purposes, a fact that seems to give the lie to their argument about customers' own priorities being the rationale for these policies.
All of which suggests two questions: Wouldn't customers rather prioritize their own transactions instead of having the bank paternalistically do it for them? And if that's the case, what reason -- other than the bountiful fees -- would the banks have not to give their customers that control?