Banks Bank on Making Money from You

Quick on the withdrawal, slow on the deposit. That is how many banks operate when it comes to taking money from and adding it to your accounts. Here’s the reason why:

A federal law known as ‘check 21’ took effect five years ago. This law allows banks to convert paper checks into digital images and then settle them by electronic means instead of having to sort through piles of checks every day. While this is good for them, it is bad for you because it means that when you write a check, it is processed much faster and the money leaves your account sooner.

The old method of using what is known as ‘float’ is almost gone. That is the time between when you write the check and when the money comes out of your account.

On the other hand, when you make a deposit into your account, you have to wait the same amount of time that you used to have to wait 20 years ago. It is more than ironic that this policy has not changed. It seems that the advantages are all in favor of the financial institutions with which we do business.

Here is what you need to do to protect yourself:

Know Bank Policies

Rules on funds availabilities are set primarily by the Federal Reserve but, there might be some local bank policies that you need to know as well. The best thing to do is to go to your bank and ask for a policy statement that spells out when funds are available on deposits.

Ask about fees for overdraft charges while you are there. You should have a full understanding after reading the policy how much these fees are and when you might be subjected to them.

It is unfortunate that we are made to dance around policies just to make sure that we can keep our hard-earned money, but that is the kind of world we live in today.

Use Float Sparingly

Do not try to test the system and see how far you can push the funds available policy or writing checks in order to keep the money in your account longer. This is a plan for disaster and the fees that you will incur will eat up the balances in your accounts quickly.

Manage your money and accounts in a way that you keep yourself out of trouble with these policies. You will be better off and keep more of your money in the process.