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For a while, banks were maliciously ordering such transactions, to create such scenarios. That's why I'm real cautious about debit cards.

by ansible 10y ago

function_seven 10y ago
Yup. I don’t think they ever processed debits before credits in any given day. (The standard AFAIK has always been to process all credits first, then do the debits. This might be an antiquated understanding, though). But what they did do was to process the largest debit first, then the next largest, and so on. You have $100 in the account, and completed four transactions at $4, $8, $15, and $90? In that order? Too bad, 90 goes first, followed by three overdrafts.
tinco 10y ago
You're cautious about debit cards? The only alternative being credit cards, where each transaction by definition is an overdraft? Maybe I'm getting this wrong, I'm from Europe where we don't really use credit cards. What fee are you talking about? If you use a debit card, and you don't have the money it will simply refuse the transaction right?
- deleted 10y ago
  [deleted]
- computerphage 10y ago
  No, they will charge you a fee called an overdraft fee for the "service" of allowing you to purchase the item. They basically extend you a small line of credit (there's some upper limit before they will deny the purchase) and then charge you, say, $35. Credit cards are always overdrawn in the sense that the bank has extended you a line of credit, but they don't have a fee associated with typical use.
- deleted 10y ago
  [deleted]
- klodolph 10y ago
  I think you are using the wrong definition of "overdraft". On a credit line, an "overdraft" is when you've already exhausted the line of credit. This is often possible, and there are often not really any fees or penalties associated with it. They are just giving you more credit than they originally promised to give you. American perspective here—I feel safer using a credit card because it's not my money. If someone fraudulently bills my credit card, it's the bank that they're stealing from, not me. There are legal protections in place which limit my personal liability. With a debit card, if someone fraudulently uses it, the money is gone and you have to fight to get it back. There are legal protections which limit my liability here too, but when I invoke those protections I'm starting from an inferior position (the money is already missing from my account), and those protections are a little better for credit cards. Our accounts are also often reconciled with ACH, which is not as fast as it could be. So it's not always true that the transaction will be refused if you don't have the money. It's often true, but credit cards are safer because there's not really a penalty for going over your line of credit.
  - ansible 10y ago
    Yes, all this is also my perspective as a USA citizen. At the very least, I'd recommend that you have a separate debit card account that is used for store purchases and such. This gets filled (manually!) from another account which you also use only for really important stuff like utility payments, housing, car payments, etc.
jon-wood 10y ago
At least my UK bank will immediately allow my bank account to become overdrawn while also sending me a text message letting me know that. So long as the account is in credit by 11pm that day no charges or interest are due.

For a while, banks were maliciously ordering such transactions, to create such scenarios. That's why I'm real cautious about debit cards.

by ansible 10y ago

For a while, banks were maliciously ordering such transactions, to create such scenarios. That's why I'm real cautious about debit cards.

function_seven 10y ago

Yup. I don’t think they ever processed debits before credits in any given day. (The standard AFAIK has always been to process all credits first, then do the debits. This might be an antiquated understanding, though). But what they did do was to process the largest debit first, then the next largest, and so on. You have $100 in the account, and completed four transactions at $4, $8, $15, and $90? In that order? Too bad, 90 goes first, followed by three overdrafts.

tinco 10y ago

You're cautious about debit cards? The only alternative being credit cards, where each transaction by definition is an overdraft? Maybe I'm getting this wrong, I'm from Europe where we don't really use credit cards. What fee are you talking about? If you use a debit card, and you don't have the money it will simply refuse the transaction right?

deleted 10y ago
[deleted]
computerphage 10y ago
No, they will charge you a fee called an overdraft fee for the "service" of allowing you to purchase the item. They basically extend you a small line of credit (there's some upper limit before they will deny the purchase) and then charge you, say, $35. Credit cards are always overdrawn in the sense that the bank has extended you a line of credit, but they don't have a fee associated with typical use.
deleted 10y ago
[deleted]
klodolph 10y ago
I think you are using the wrong definition of "overdraft". On a credit line, an "overdraft" is when you've already exhausted the line of credit. This is often possible, and there are often not really any fees or penalties associated with it. They are just giving you more credit than they originally promised to give you. American perspective here—I feel safer using a credit card because it's not my money. If someone fraudulently bills my credit card, it's the bank that they're stealing from, not me. There are legal protections in place which limit my personal liability. With a debit card, if someone fraudulently uses it, the money is gone and you have to fight to get it back. There are legal protections which limit my liability here too, but when I invoke those protections I'm starting from an inferior position (the money is already missing from my account), and those protections are a little better for credit cards. Our accounts are also often reconciled with ACH, which is not as fast as it could be. So it's not always true that the transaction will be refused if you don't have the money. It's often true, but credit cards are safer because there's not really a penalty for going over your line of credit.
- ansible 10y ago
  Yes, all this is also my perspective as a USA citizen. At the very least, I'd recommend that you have a separate debit card account that is used for store purchases and such. This gets filled (manually!) from another account which you also use only for really important stuff like utility payments, housing, car payments, etc.

jon-wood 10y ago

At least my UK bank will immediately allow my bank account to become overdrawn while also sending me a text message letting me know that. So long as the account is in credit by 11pm that day no charges or interest are due.