Master Your Card

As many of you are aware, the Visa debit card is something that goes along with your account and allows you to quickly make purchases, rather than writing out a check. It is also referred to as a check card because, essentially, it is meant to replace checks.It is NOT a credit card and does not have a line of credit attached to it. In most cases, the amount that you can spend is what you have in your checking and overdraft protection accounts. So, if there’s zero money in the checking, but some in your overdraft protection, it will pull from that account until it is depleted.

Now, we’ve talked about this before, but just as a refresher, if you don’t have overdraft protection, it is still possible to overdraw your account. Every bank gives you a little leeway as a courtesy so that you’re not left standing in line embarrassed with a declined card. You may not want to have that leeway, if you don’t, talk to you bank and ask them to set it up where the card cuts off if there aren’t funds available.

There is one small caveat to the above, though. There is a difference in what you can choose when making purchases at point of sale (POS). When you go to the grocery store, mall, or wherever you do your shopping you’re usually given the choice of choosing between debit or credit. You can chose either one, but the difference is in how they clear.

If you chose debit and enter in your four-digit pin number, then the transaction clears your account immediately. If you chose credit, when that transaction clears depends on the merchant. Every merchant is different and it will vary, but typically, when you use your card as credit and sign for it, it takes a few days to clear. This is because credit is held aside in their processing and then batched in groups determined by the merchant. It is then processed through their merchant services bank and then sent to the various banks the merchant service bank needs to collect from. Sometimes it’s sooner rather than later; however, the merchant has up to 60 days to submit their batches.

Let me be perfectly clear, it is NOT the banks’ fault if a merchant holds on to a transaction for several days. This is why we tell you to keep a checkbook register and balance it. Record your transactions because memories are faulty. It’s very easy for people to blame their banks, and I’m not saying banks are never wrong, but the fact is, people have to take responsibility for their own actions too.

If you have money in the account to cover the debits, but a preauthorized debit clears before the bank receives the debit card transactions, that’s not the bank trying to screw you out of money. The preauthorized debit cleared the account first because it came in first. It is a legitimate transaction. If you want your purchases to clear immediately so you don’t have to worry about something like this happening, use debit and enter in your four-digit pin.

That’s may stance on debit versus credit with the debit cards. People are always quick to blame the bank, but it’s the merchants and when they process their credits that are the culprit. However, there is one area in this that I think bank’s and credit unions could do better in. Let’s discuss what happens when multiple debits come in at once and how they’re posted.

There are three different scenarios here that banks fall under. The first is that all debits are posted in order from largest to smallest. The second is that all debits are posted in order from smallest to largest. And the final scenario is based on a live system where debits post as they come in, regardless of amount. Each one has their ups and downs, so we’ll talk about them and see what you guys think.

With scenario’s one and two, credits are usually posted before debits. That means if you’ve got a direct deposit coming in at the same time as five other debits, they’ll post your deposit first followed by the debits in whichever order the bank has in place. Now, those banks that go with scenario one where they post debits from largest to smallest do so because they want to make sure that big ticket items like rent and car payments are paid and not sent back. You run the risk of having things returned when you overdraw, so they’re wanting to make sure those bigger items get paid.

Those banks who chose to use scenario two where they post debits in order from smallest to largest say that they received too many complaints because customers were paying more fees by doing it the other way and they wanted their smaller ones covered and then they’d pay any fees on the larger ones, which usually results in less overdrafts but more returned items which gives you fees on both sides.

The third scenario, and the one I think every bank should go with is the live system. All items are posted as received - except after business hours, those are posted first thing the next morning in the order they came in. The reason I like this is because it holds people accountable for their actions and they have no one to blame but themselves. I’m all for helping you out the first time or two you get a fee because you’re getting used to how we post debits and credits. But, someone that is spending money they don’t have because they’re expecting a direct deposit in a day or two just doesn’t fly with me. It’s banking 101…don’t spend money you don’t have.

The credit union I work for does the live system and I get less complaints about how we post stuff than any other bank I worked for. So, once you get used to the idea of items posting when they come in regardless of amount or type, then most people seem to like it better than the other two scenarios. And sure, mistakes are made by bank personnel - I made one today as a matter of fact - so I’m not above admitting that in some cases there is cause to be angry with your bank or credit union. However, this is where I think I’ll get some disagreement because we’re talking two different perspectives. Consumers have an obligation to understand their accounts before negligently using them. Yes, there is some responsibility to the banks to explain things, but let’s look at this realistically.

How many people walk into a bank and ask to open an account, but then immediately follow that up with the question “How long will it take?” I can tell you that I’ve had maybe a handful in my experience that haven’t been concerned with the time. People get in a hurry and don’t always listen to the things they’re told. Beyond that, it’s impossible for a bank to tell every single customer every single detail about the account in one sitting. If I could explain every detail in one sitting, then I’d only need one post to explain it to you here, yet you see how many we post. The point is, that’s why we give people disclosures and business cards. It’s not the banks’ fault if you don’t take an active interest in your account until something goes wrong.

That’s not to say that some bankers shouldn’t be better at disclosing certain things at time of opening. When I open an account I have a set list of things I talk about. Aside from the obvious account types and features, I give the customer a brief tutorial on their debit card and the difference between debit and credit, I discuss overdraft fees and how we post credits and debits, and I discuss holds because new accounts are subject to holds according to Reg CC. There are a few other things I’ll go through, but typically in a setting where I’ve promised the customer to have them out in 15 minutes, I’ve got to pick the most important items.

Now, I also follow up with new members at 10, 30, and 60 days to ensure that everything is working smoothly and there are no additional questions I might need to address. If there are, then we deal with them. I think people appreciate the follow-up because they’re not just a number, but also because it does give them a chance to address any issues they have.

Back to my original point of this post, though. If you’re using your debit card as credit and signing, then that transaction can take several days to clear because of the merchant’s processing times. It has nothing to do with your bank. They don’t hold stuff over and post it just because they want to fee you to death. Learn your banks processes and simply avoid any trouble in the future.

What are your thoughts? Do you know how your bank posts their transactions? Of the three scenarios, which do you think you’d prefer?