Take Control of Your Financial Destiny

Bear with me while I tell you a story.

Picture yourself in a busy grocery store. Every line is backed up a few carts deep and your grocery cart is full to the brim. You choose the closest lane and wait. As you wait, you do your best to distract your five and two-year-old children from the candy and toys the store so conveniently placed right at their eye level. After 15 minutes in line, it’s your turn. You thankfully place your groceries on the conveyor belt and wait to find out the damage. After having a mild anxiety attack as the total cost racks up to $150 on the register screen and, regretting the spontaneous purchases you made, you hand the cashier your debit card. She runs the card and politely tells you it has been declined. WHAT? You know you have plenty of money in there! You look around to see how many people are listening to the conversation and, after she tries it unsuccessfully for the second time, you dig frantically in your purse for your credit card because you just want to get out of there. At this point, the emotions of frustration and embarrassment are running amok in your mind.

After unloading your groceries at home, the next item on the agenda is calling the bank to find out why on earth your card was declined. Upon calling the bank, the Personal Banker tells you a large check cleared your account this morning that caused an overdraft. This overdraft is the reason your debit card wouldn't work. “What check?” you ask. “It appears your husband wrote a check to the lawn care company for $650, so you are currently $50 overdrawn,” the Personal Banker states.

The response to this could be any of the following; “He forgot to tell me he wrote that check,” “I didn’t realize that would clear the bank so quickly,” or “I forgot to subtract that from my balance.” Any of these are perfectly valid and human responses. We all make mistakes, including the bank. It is how we handle these situations and learn from them that matters most.

Now, to the point of this blog. How can you avoid these situations? At The Bank of Tioga, we have several options for our clients to avoid this situation. These options include:

1. Low Balance Alerts -- TBOT Online banking clients can set up text or email alerts to notify our clients when their balance has fallen below a certain dollar threshold. This threshold can be set at any dollar amount. One downside to these alerts is that they are only sent once per day at the end of the business day and are not real time. The Bank of Tioga is anxiously awaiting the release of an enhancement to our current online banking platform that will allow us to send real time alerts. This enhancement is approximately 6-12 months out.
   
   Downloading our mobile app to monitor your account on the go will also help you keep track of your available balance and view any pending items. Your mobile app currently displays two balances; current and available balance. Current balance is the balance at the end of the prior business day and does not take pending items into account. This is the balance that appears when you enable the instant balance option on your mobile app. Available balance includes all pending items posted to your account. In our situation above, this alert may not have been enough to prevent the decline since the check cleared the same day and the alerts only happen at the end of the business day.

2. Sweeps -- For our clients with a savings, additional checking or line of credit, The Bank of Tioga can use a sweep tying your secondary account to your primary checking. Using our very vivid example above, if our client had tied her savings or secondary checking account to her primary checking account and the secondary account had adequate funds, her debit card still would have been declined. The sweep does not occur until the end of the business day when all debits have been presented for the day and one lump sum is swept in to the primary account to cover an overdraft. The Bank of Tioga recently removed our sweep fee so this service is absolutely free for our clients. There is no enrollment fee or ongoing sweep fees. In this same scenario, if our client had tied her home equity line of credit to her primary checking account, and the line of credit had adequate funds, her debit card would have been approved. There are no sweep fees associated with a line of credit but interest rates and annual fees may apply.

3. Overdraft Limit -- For those situations where there is not a secondary account or line of credit to draw from, and either a miscommunication or a mathematical error caused an overdraft, The Bank of Tioga does offer the option of a $300 overdraft limit. Clients have two levels of adoption to choose from related to the overdraft limit. The first level is coverage for checks and ACH payments only. This does not include debit card purchases and would not have helped in our situation above. If our clients choose this first level of coverage, our second question is whether they want to have the $300 overdraft limit tied to their debit card. This means, since our client above was overdrawn approximately $50 at the time she bought her groceries, this option would have prevented the card from being declined. Full disclosure… the $300.00 limit includes overdraft fees. For instance, using our grocery store example, she was overdrawn $50 before she swiped her card. The additional $150 in groceries plus a $35 overdraft fee would put her at an overdraft of $235. This service is by far the most costly option. Clients always have the option to NOT tie the $300 to their debit card, have the card denied at the point of purchase and avoid any overdraft fees caused by debit card purchases.

Contrary to popular belief about banks, The Bank of Tioga does not want our clients to overdraw their accounts. I think this bears repeating…we do not want you to overdraw your account. So, you may ask, why do you charge overdraft fees? Great question! We view overdraft fees as a deterrent. Fees can be grouped into two categories, 1) fees charged to recoup expenses and 2) fees charged as a deterrent to prevent a certain behavior. Our overdraft fees are tiered based upon the amount of the purchase. This more closely ties the amount of your purchase to the fee. If you have opted into using the $300.00 overdraft limit on your debit card, are currently overdrawn within the $300, and swipe your card at Starbucks for $8, the fee assessed will be $5.

One area of controversy that has come up in recent years related to overdraft fees surrounds the order in which banks process payments. Some banks process the largest items first to ensure clients go overdrawn more quickly and rack up significant fees. At The Bank of Tioga, transactions generally are posted each business day in this order: (1) deposits or incoming transfers posted before that day's cutoff time; (2) your ATM or debit card transactions from lowest to highest amount; (3) in person and electronic withdrawals or fund transfers from lowest to highest amount; (4) checks sequentially by check number; (5) automatic payments (ACH) in ascending order; and (6) any interest credited to your account. Our goal is to post items as closely as we can to the order in which you made the payment. 

We prefer to educate our clients to ensure they are leveraging the options we offer to avoid overdrafts. If an overdraft occurs, we are here to counsel you on your options, beginning with the most affordable.