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Originally Posted by Clodfobble
One that will let you spend money you don't have with no consequences?
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Banks can generate an overdraft simply by timing the way that they receive deposits. If they post the deposits last, say a payroll check, and post any checks the customer wrote first, they can generate overdrafts on all of the checks, even though the money to cover the checks was deposited on the same day.
They can also generate multiple overdrafts instead of a single overdraft by processing the largest check first.
Example: A customer has $100 in an account and has written 3 checks for $25, $55, and $105 dollars. If the bank processed the two smaller checks first, there would be a single overdraft of $80 generating a single $35 overdraft fee. If the bank processes the largest check first, there would be three overdrafts totaling $80 generating $105 in overdraft fees.
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JPMorgan Chase (JPM, Fortune 500) will start processing and clearing expenses in the order the purchases were made, chronologically, instead of biggest to smallest, which can deplete bank balance sheets faster and lead to more fees.
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Legislation is being drafted to regulate these practices.
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