Checking accounts news on its uses and bank policies

If the recent pools done by banks are true, checking accounts have strayed away from their originally intended use. If you are an owner of such account you should know that it’s purpose was and still is saving money, and the reasonwhy the majority of US citizens havestarted searching for other uses is a subject that needs a bit more researching, the banks on the other hand have also adjusted to this “phenomenon” in their own way.

During last month Novantas conducted survey with a goal of identifying the use of checking accounts. What results have shown, in short is – less than 15% of Americans on one hand use this type of accounts for savings (such as their retirement funds) while on the other hand more than 60% of US citizens use them as sort of “cash flow” or “emergency funding” means.

As for banks, The Wall Street Journal conducted their own research into banking policies regarding those types of accounts. During the last economic crisis banks used so called “high-to-low” processing method. In practice this meant that if a person was using his bank account to pay for petrol, utility bills, food etc., bank would deduct its fees from the highest transactions first instead in the order they came in. This way of managing client accounts led to higher bank fees which in a long run put their users into unfair overdraft situation. In addition to low interest rates on this way of saving they were also slowly milking out their clients checking accounts. In short, you may have had 500 dollars on your bank account and another 1000 dollars in your savings account (as a backup) by having spent 550 dollars, your overdraft would cost you more than just those extra 50$ because of bank fees on those higher payments being processed first. According to report, during last year, banks earned over 30 billion USD in overdraft fees thanks to treating their clients this way.

The good news is that thanks to increased criticism, banks are slowly abandoning this way of processing their clients’ transactions. There are still those that are keeping up to this way of doing business (some 16% of American banks) and if you’re thinking about saving money (or using it as the majority of Americans do at this time) in a form of checking accounts you should be aware of your bank policy concerning this matter. There is no harm in asking up in front and it’s certainly better than paying more for any overdraft you may encounter.