I received a strange call from my bank on Thursday.
Since my savings account was closing, the man, said, if I could go online and transfer the money in my savings to a different account, it’d keep my money immediately available rather than being mailed to me by check.
“Wait a second,” I said. “Come again?”
The guy seemed nice enough. But I stopped him dead in his tracks when he mentioned the part about my savings account closing.
Was the bank going out of business? Had I missed a memo?
It turns out I had too many automatic overdraft transfers from my savings to my checking within the same month.
Let’s back up a second.
Once upon a time, we had those little passbooks for savings account and actual checkbooks and checkbook registers for checking accounts. The savings account passbooks were updated with the latest balance anytime a deposit or withdrawal was made by the teller, who would place the little book into a mechanical printer the size of a Volkswagon and about as loud as one. Checking accounts were kept up with, paper check by paper check, by manually adding up deposits and withdrawals so you always knew down to the penny how much money you had.
It was easier back then because deposits involved bringing a paycheck to the bank. Withdrawals meant writing a check. Outside of those two events, your money pretty much stayed put, untouched by human (or electronic) hands.
Then technology began to evolve. There was direct deposit, allowing our employers to send our salaries directly to our accounts: no check printing, no mad dashes to the bank to make sure the money went in before bill payments went out. Suddenly, as if by magic, money just showed up without anyone having to lift a finger.
Then online banking expanded to include regular bill payments and electronic debits. And check cards. We could now spend money faster than we could record the expenditures in that little checkbook register.
Checkbook register? What’s that? Does anyone have a checkbook anymore? Many don’t. I do, but I barely ever write a check these days.
And with electronic banking, online bill pay and direct deposit came a new problem: sometimes payments you’d authorized to be made automatically were for an amount other than what you were expecting. And some payments wouldn’t necessarily happen at the exact same time every month. This meant that even with the best bookkeeping and planning skills, you could sometimes get caught a bit off guard as you scheduled and planned to make sure you never were late with a payment.
Then there’s the very real concern about hacking, where people steal personal data and could compromise an account. If you choose to rollover more money into your savings so that your checking account carries less money in case someone unauthorized gets in before you realize it.
Enter automatic overdraft protection! Well, this was an answered prayer if ever there was one! Now, for those moments when we forget to record a debit or get caught off guard by an insurance payment that was for $114 instead of the $82 you were expecting, you could now tie your savings account to your checking account and your troubles were over.
Many banks offer text alerts to enable instant notification of when debits go through or when accounts dip below a certain threshold. If that amount is high enough, you can manually transfer money from savings to checking to prevent an automatic overdraft. If it’s too low, you may not beat the overdraft protection to the punch.
Even so, sometimes you can’t see the pending charge and transfer money to cover it before the bank kicks in, anyway. So without a crystal ball, you can’t always guarantee that you’ll prevent yourself from having a problem.
Back in 2009, as best I can tell, federal regulators stepped in with Regulation D. They decided to limit the number of withdrawals one can make from his own savings account. Apparently, for reasons known only to God, six became the magic number. As my bank explained it, six automatic transfers, six telephone transfers, six online banking transfers or payments, etc. Essentially, if you make more than six of any kind of valid way to remove your money from your account, well, that’s suddenly a problem.
And just to make sure I’m clear: it’s not just automatic overdraft transfers that count against you: if you go online and transfer the money yourself, that’s still a problem.
Years ago, I set up my savings account to feed my primary checking account as a form of overdraft protection. My other option was to turn to a credit line to cover such situations if I don’t transfer money quickly enough. But those line of credits generally offer come with interest rates that are too high and are treated as cash advances, so you begin accruing interest as soon as the transfer happens. That’s certainly not an ideal option.
The representative who called me said I should have received a notice in the mail a few weeks earlier. He suggested that I transfer the balance of my savings into my checking account; otherwise, that money would be locked up and unavailable to me until a received a check from the bank that would be mailed to my home.
He suggested that I then go to my branch the following day and open up a new checking account — apparently, I’m banned from opening a savings account at the bank for six months! — and then designate that checking account to serve as the overdraft account for my primary checking account. That way, I could still control how much money went to the account my check card was connected to. Checking accounts, he explained, had no such transfer limits the way savings accounts do.
The following day, on Friday, I went to the bank and expressed my extreme discontent with the manner in which I’d been notified (and the lack of notice), and I was again assured that I should have received a letter in the mail 30 days prior to the account being closed.
Neither accused me of lying when I assured them I hadn’t, but I could tell they were thinking I either missed it or ignored it.
I opened a checking account to serve as my “savings” account, but was then informed that I’d been misinformed on the overdraft plan: a checking account can’t serve as an overdraft account on another checking account.
Again, it’s my money. Why are there such unnecessary rules governing how I control it? Everything is done by computer these days, anyway. I’m not forcing some already-overworked bank employee into overtime with a bunch of manual transfers.
So I walked out of the bank without a savings account, with an extra checking account which will be my “pretend” savings account, and a warning that I should be careful not to allow the credit line — my only other option for overdraft protection — to kick in unless I was okay with paying 18% interest.
This is the point at which I normally would have wrapped up this post with a warning to check your statements.
Instead, I have to add one little detail. Remember the phone call I mentioned and the face-to-face exchange, in which the tone seemed to indicate that there was an assumption I already knew about the pending account closure?
Yesterday, two days after they closed my account, I received a letter in the mail, dated 20 August, 2014, the day before they closed my account, telling me the closure was coming.
It asked me to notify them within 20 days of my preference of what they were to do with the funds in the savings account. On the day it went out, I had less than 24 hours, not 20 days.
You can bet I’ll be making a return trip to the bank, and I’ll be speaking with the branch manager this time. If he or she happens to be a reader of this blog, they should expect an earful.