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Keeping An Eye On The Bank's Computer

[Editor's Note: While I am on vacation, today's blog post is by guest author William Seebeck. I've known Bill for decades, going back to our time working together at Lexis-Nexis in Dayton, Ohio during the 1980's. Bill has a wealth of experience in online systems, banking, publishing, and public relations.]

By Bill Seebeck

It’s been around 39 years since computers have been keeping the books at banks in America. I say that because the bank I was working for in 1970, now the third largest in the world or maybe number two now, it was in that year that they began computerizing accounts.

At the end of the bank day, each bank employee, save the CEO, was given a stack of account files and a stack of data entry forms. We would fill in the data entry form from the account file. Once completed, the forms were collected and sent to the key-punch department, which was operating 24 hours per day on three shifts and did so for some three months until all the bank’s accounts were entered into the system.

Once the data was entered and the system working, calculations could be brought to bear on different types of accounts and the bank could for the first time evaluate the profitability of its accounts and the cost of its services.

Well, we have come a long way in 39 years. Today, computers do everything at banks and its in real time, near instantly. While generally that is a good thing, it can also create temptations for squeezing just a bit more from an account than the bank should.

Here is an example. Your checking account has $100.00 available. You are expecting a charge of $150.00 to be made against your account, so you transfer $200.00 from your Money Market account to your checking account. However, you make your transfer at 12:30 pm and the bank has a rule, that you’re unaware of, that holds post noon transfers until 3:30 pm or until the next morning. In the mean time, your charge hits. Now you get charged for a returned item and an overdrawn account. Today, depending on the Bank, such charges can be as much as $200.00.

The computer has been programmed to notice such things and can manipulate it to the bank’s advantage.

Bank computers are also great at changing payment cycles. Many of us think that our bills are representative of 30 days of activity. That’s not true anymore. The cycle may have been changed to 20 days and unless you’re reading those little brochures with tiny little print that they send in the mail, you won’t know that something has changed. Yet, when you pay your bill, you find that you are late, other charges are attached and perhaps your interest rate has been boosted. When you make your call to find out why, you are told that you have to pay your bill sooner than last month, because your cycle has changed. A Bank’s computer system can make a cycle change for millions of customers in seconds.

Now, I’m not suggesting that banks are out there doing these things, but it has been done and unless we keep our eyes on the Bank’s computers via our monthly statements and report such activities to our elected officials, we will become new victims of banks' greed.

© 2009 WBSeebeck


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The Dave

Not all banks do this, mine in particular is the other way around, if a cheque or other similar transaction occurs while there isn't enough funds available, my bank displays the transaction immediately but doesn't reverse it (or charge any fees) until the end of the business day.

Even if you make an unverified deposit at an ATM, the bank holds the debit transaction in limbo until the deposit is verified, only bouncing the debit transaction if the deposit declines.

While some banks use their computers for evil, it's worth noting that prior to computers if a cheque arrived at noon and I didn't put money in until 3pm, it would likely have already bounced, whereas today my bank will allow such a transaction to succeed even though the deposit might itself be a cheque and funds aren't yet guaranteed.

Perhaps you just need a better bank.

Bill Seebeck

Dear Dave,

Thanks so much for your comments and I very much appreciate your describing how your bank's computers operate in support of its customers. That's good news.

However, I feel fairly sure that your customers don't know about how that actually works at your bank. Telling them about it on a web site, etc. would be a good thing and a long way toward establishing the type of transparency we all need and want.

For instance, a deposit is not considered a deposit until a teller mark has been made. So, an ATM deposit, while made, will not be valued until the teller actually transacts the deposit after collecting it from the machine. If that has not taken place, the unverified or "in process" deposit is considered uncollected funds, the use of which in a transaction would cause a bank charge to be debited from the account.

In writing the article, I wasn't writing about my bank, but about the capability that banks have to possibly manipulate accounts and assign charges that might be arbitrary.

Thanks again for writing in. Best, Bill Seebeck

The Dave

I should clarify, I'm not an employee, just a customer. I asked a manager why they don't advertise such as it seemed like a good selling point, his answer was that such features are only available to those with reasonably good credit (or at least enough credit that the bank is willing to cover your deposits should they bounce)

My point was more that although *some* banks use their newfound capabilities for evil, not all do.

I should also mention that mine recently put out a statement that their lending policies haven't changed due to the recent financial markets, they have not taken any bail-out money, didn't get caught with their pants down in the subprime mortgage crisis since they neither offered, nor invested in these mortgages in the first place.

Funny how that works out.

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