Bank of America Changes Transaction Posting Order

by Michael on Oct 14, 2013 · 8 comments

Bank of America Logo

When I logged in to check the status of our accounts with Bank of America this past weekend, I was greeted by a message announcing changes in how they post transactions to customer accounts.

It’s been my experience that policy changes at major banks typically come at the expense of their account holders. I was thus pleased to see that this was a positive change from the customer’s perspective. A rare thing, indeed.

In case you weren’t aware, many (if not most) banks have been posting customer transactions in such a way as to inflate the number of overdrafts that occur — and thus increase the overdraft fees that they can collect.

In short, this has involved posting debits in descending order, such that the biggest withdrawals hit first. What follows is a simple (hypothetical) scenario.

The impact of posting order

Let’s say that you haven’t been paying attention and you’ve let the balance in your checking account fall to $100. On the way to work, you swipe your debit card when topping off your gas tank ($30). You then swipe it again for a cup of coffee ($3), and use it later in the day when you grab lunch ($7).

Despite your low balance, it’s all good. But then you head head to the dentist in the afternoon and use your debit card to pay the $110 cost of your visit.

Uh-oh. This last transaction is going to trigger an overdraft. Right? Well, yes, but it could be even worse than that. In fact, if your bank posts that day’s transactions in descending order, you’ll be facing four overdrafts instead of one.

That $110 visit to the dentist will hit first, taking your balance negative. This will be followed by the visit to the gas station, the lunch and, finally, the cup of coffee.

Wow. One overdraft just became four, all because of your bank’s customer un-friendly method of posting transactions. Bad for you, great for the bank.

Bank of America’s new posting policy

In fact, Bank of America has typically sorted transactions much as I outlined above, with larger transactions hitting first. But that’s no longer the case. Now they’ll batch them by type and (mostly) sort them by when the order in which they occurred.

Here’s the scoop:

Many of your frequent debit transactions on your checking and savings accounts will now be posted in a different order. This order will affect how your transactions appear in Online Banking and on your monthly statements.

Today, we generally post most transactions in order of highest to lowest dollar amount, which may be different than the order in which you made them throughout the day. Now you’ll start to see many of your most frequent debit transactions subtracted from your balance in the order you made them.

More specifically:

  1. Deposits will post first, from largest to smallest
  2. Debit transactions will hit next, in the order in which they occurred
  3. Checks will hit next, in numerical order
  4. Other electronic payments/transfers will post from largest to smallest
  5. Any other fees will post, again from largest to smallest

So it’s not perfect, in that categories 4 and 5 will still be sorted from largest to smallest. But it’s certainly an improvement over how things used to be.

If you like this change, you have the CFPB to thank. They’ve been publicizing this problem over the past year or so, and it looks like Bank of America is trying to get out in front of any forthcoming changes.

Honestly, it’s about time. Banks like Capital One 360 (formerly ING Direct) have handled things like this for years. Oh, and did I mention that they’re offering a $50 signup bonus? Not a bad deal if you’re looking to switch banks.

1 Kurt @ Money Counselor October 14, 2013 at 1:54 pm

Overdraft and other fees have become a huge revenue source for financial institutions. Glad to see Bank of America making the change–I’d subscribe to the ‘trust but verify’ philosophy though in assuring follow through.

This change would never have happened without a lot of highly public squawking and exposure by various nonprofits and regulatory agencies. Bravo!

2 Michael October 14, 2013 at 2:10 pm

Yeah, and this also makes me wonder how they’ll compensate for the inevitable loss of revenue. I’m sure they’re planning on making up for it somewhere…

3 Edward Antrobus October 15, 2013 at 10:35 am

Even more mind-blowing is the fact that it is Bank of America that is doing the right thing. No company I’ve dealt with brings to mind images of the evil empire quite like they do.

4 Money Beagle October 15, 2013 at 11:18 am

If memory serves I believe that this was a requirement or at least a give that the banks had to agree to in order to get something that they wanted.

Personally, I leave at least a $1,000 cushion in the bank at all times. Yes, it’s money that I’m not earning interest on, but these days, it would take years to earn enough interest to offset even one overdraft fee.

5 Michael October 15, 2013 at 12:41 pm

I thought so, too, but was unable to find a clear mandate when I went back and looked. There was, for example, a CFPB report issued earlier this year studying the problem, but no clear outcome from that.

If you find it, let me know. Until then, I’ll have to ascribe it to Bank of America trying to get out in front of forthcoming changes.

6 Rebecca @ Stapler Confessions October 15, 2013 at 11:22 am

Numbers 1 and 2 are great changes! Too bad 4 and 5 are still designed to squeeze customers for the highest number of fees possible 🙁

7 Michael October 15, 2013 at 12:39 pm

I think that part of the problem with #4 (maybe less so with #5) is that it may be difficult to tell when a transaction actually “occurred” with some of these. I’m not sure how things work on the back end, but it may even be the case that they receive electronic transactions in batches. In that case, how would you determine the order in which they were received?

Of course, the fact that they’re defaulting in these cases to the most customer-unfriendly way of doing things in this case speaks to their primary motive…

8 Dave October 18, 2013 at 9:24 am

This change is probably a result of the FDIC guidance:

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