Okay, this isn't the first time that I have done this. But it is the first time in like almost ten years! Here's what happened. My wife (Mrs. LAMoneyGal) and I have three checking accounts: mine, hers and ours. The "Ours" account is the main account. It's where our paychecks are both direct deposited, and all household bills are paid. The "Mine" and "Hers" accounts are basically our "allowance".
We allow ourselves an allowance of $300 per month for personal expenses, including gifts to one another. It's a generous amount, but you can imagine that the "mine" checking account doesn't typically sit at a very high balance (like maybe around $1,000).
We use one credit card for our common expenses, the Hilton Honors American Express card. We typically run up a monthly balance of around $2,000-$3,000. Last month included some large unusual expenses, so our balance was $3,500. Of course, we pay our balance in full each month. So, I went online and scheduled a payment without reservation, knowing that we keep enough in the "Ours" account to cover it.
Well, one side not on this. The American Express card used to be my card before we were married. And the "Mine" checking account used be my primary personal checking account. So, it was one of the banks linked to the American Express card for payment. And, of course, I accidentally selected the wrong bank account.
You can imagine what followed. American Express submits payment to by Chase bank account, and it is rejected as NSF (Non-Sufficient Funds). I get dinged with a $33 NSF fee. I received notification by email, but I didn't even open the email because I thought it was a typical "your statement is ready" or "update to our account terms" email. So, the next day Amex resubmits the payment request, and again it rejects. Another $33 fee. This time, I open my email, and... "Holy Crap! What happened?"
Here's how I resolved it. I called the bank and asked politely for both fees to be reversed. As I have been a long time account holder and do not have any NSF charges on my record they agreed. Then I called American Express and learned that they resend any rejected payment request three times. So, the third one will happen today. And, no, they will not reverse the $38 returned payment fee. However, they did agree not to charge finance charges for my balance in full payment not being received on time. I then jumped right back on the Chase site to make a transfer of funds from our joint account to my individual account so that the third payment attempt is not rejected.
Phew! Crisis averted.
My next action was to remove my individual checking account from the list of payments accounts for that American Express card. Don't want to make that mistake again.
Unfortunately, for many, dealing with overdraft charges is a much more real and potentially frequent experience.
An article in today's LA Times by Kathy Kristof tells the story of one woman and her struggles with bank overdraft charges (and her high wire balancing act to try to avoid them). The troubling part of the story is the description of the policy of most banks in this situation. In the event that multiple charges against an account arrive on the same day, they arrange them from largest to smallest and try to pay them that way. What usually happens is that the first one causes overdraft, and all subsequent charges also cause the account holder to get dinged with NSF fees.
So, in my story above, let's say that I also has a small check of $20 that I wrote to a friend that arrived on the same day as my Amex payment. And two other debit transactions of $39 and $78 that same day. If I understand the article right, the bank would have attempted the American Express payment first, and rejected it. Due to the large payment attempt, other three transactions would also have been rejected. Or, if not rejected, paid, but still incur NSF fees. This despite the fact that there was plenty of money in the account for the $20, $39 and $78 transactions.
At $33 a pop, it's an expensive policy for consumers and a profitable policy for the banks. According to Kathy's article, Chase will be changing their policy "in the first few months of 2010."
Can't come soon enough.