Why do banks allow you to pay for something online even if you don't have enough funds?

Alan MacNeill

Alan MacNeill, Cognos geek, Poly Sci wonk, bigoudi et généralement curieux

Répondu il y a 94w · L'auteur dispose de réponses 2k et de vues de réponses 2.3m

(Assuming you're referring to a Debit Card transaction tied to your Checking account)
Plusieurs raisons:
1. Your "Available Balance" and your "Ledger balance" are not the same thing...Available balance is reduced by holds for charges pending, checks that haven't cleared yet, etc. Ledger Balance, which is the one that really matters, doesn't debit or credit until a charge clears. As such, you may actually *have* the money in your account, just not in your "available" balance
2. Banks find it profitable to allow customers to overdraft to a degree that they are confident will be repaid in a timely fashion. This enhances customer loyalty (by reducing the anger in "Oh, come on now...why is my card rejecting?") and is really a low risk (particularly if you have an electronic deposit to your account of your paycheck, which most do these days).
3. the old school reason...if you have a Paper check outstanding, the bank doesn't know that you've spent that money yet...so it will approve a Debit card transaction...then when the paper check arrives, BAM! you're overdrawn. Banks hate to return paper checks these days (it's a pain administratively), so they'll tend to pay the charge and just ring you up an overdraft fee.

On the plus side, this won't impact your credit report at all, nor will it really affect your relationship with your bank...it's not at all unusual, nor is it unpleasant from the bank's point ov view

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Javier Ortíz Buitrago

Javier Ortíz Buitrago, studied at Universidad Autonoma De Colombia

Répondu il y a 94w

I work for a bank, in fact we have the largest credit card installed base in the hole country.

There are a couple of reasons why the bank would allow you that transaction:

  • Visa, MasterCard and other credit card brands are not linked in perfect real time with your bank’s server, so at times the bank doesn’t know you already spent all your allowed credit and allows the transaction to be charged. That's specially true for things bought in other countries or over the internet.
  • At least where I work, banks have enabled an extra credit limit by default to every card owner. Case and point, it is of 5% over the card’s authorized credit limit. Basically what it does is protect you from unpleasant events like not being able of paying for a taxi in the middle of the night or not being able of buying that sweet 70″ 4K TV set that’s on sale because you're $ 20 short.
  • Over that extra credit, the bank’s database has already compiled some information about your habits, particularly about your payment habits and other information that, when combined with information from bureaus leds to the conclusion that you're a good enough client to allow those extra $ 30 to be charged to your bill. You’re not that risky and certainly won't leave the country for mere $ 30, are you?

Anyway, you should always be very aware about how much do you own the bank and manage that credit between safe limits (under 50% is suggested by a local bureau).

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Dominique Bivins

Dominique Bivins, former Video and Digital Communications Specialist

Répondu il y a 89w

The bank I worked for had a default setting on the account where they would allow you to overdraw your account up to a certain limit and only started charging a fee once you were in the hole $5.

Depending on your bank or credit union, you may have options on how overdrafts are handled for your account. If you want, you can choose to have your card declined as soon as you are negative by $0.01, while allowing ACH payments to go into the negative (since these types tend to be bills it's more important they be paid). You could also choose to have everything declined as soon as you cross into the negative, but be aware that returned ACH payments typically will get you a fee from the merchant.

Most banks offer several ways to help you monitor your spending through apps, emails, daily balance or alert texts for free. I recommend taking advantage of it because it's terrible to feel powerless when it comes to your hard-earned money.

Erik Fair

Erik Fair, J'utilise de l'argent tous les jours.

Répondu il y a 94w · L'auteur dispose de réponses 5.6k et de vues de réponses 7.9m

Because they will charge you for the privilege of borrowing money from them (which is what you’ve done when you overspend or in their language “overdraft” (each check written to pay someone from a bank account is historically called a “bank draft”)).

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