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rjzzleep

What's transaction reordering?

1. have $10 in your checking

2. pay $9 for steak

3. fill account with $500

4. buy sausage for $2

bank reorders it as

1. have $10 in your checking

2. pay $9 for steak

3. buy sausage for $2

4. charge overdraft

5. count $500 deposit

Is that what banks would do? I faintly remember that really old accounts I had in Germany had overdraft capability, but for all newer(last decade or so) accounts, I had to explicitly request overdraft. I guess it was inherently more user hostile in the US. Although in German its not because of good service, but rather because banks don't trust the consumer.

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The specifics of it are dependent on the bank, but it can be more insidious than even your example.

Given a balance of $100 and 4 transactions of $20, $20, $20, $90 you can either be charged one, or three overdraft fees depending on the order in which your bank deducts those from your account. Basically, ordering from largest to smallest will cause the most number of overdraft fees.

I'm going to re learn the lyrics to Oh Canada and sing them joyously and thankfully... Our banking system gets a lot of ire but dear Gawd.

I seem to recall there being service levels at banks in Canada and maximum numbers of transactions per month until one gets hit with per-transaction fees. I was told explicitly when I opened my TD Canada Trust account there that it was imperative that I both keep money in the accounts and use them occasionally or dormancy fees would accrue (and if there was no money left, they'd then slam it with overdraft fees).

The benefit of US banking despite lax regulation was that there's a ton of different banks and credit unions to choose from. Some are great and some are shit. Literally hundreds to pick from. Canada there was like 5 big banks, a large credit union, and then depending on your area there was maybe perhaps a small community credit union.

Totally agree, the Canadian banking system is a corrupt cartel the levies it’s own tax on every Canadian. This was made even more clear to me when I moved to the Netherlands and every banking fee was suddenly 1/3 as much as in Canada for the exact same service.

Here in Finland banking fees are a thing only for the poor (and even then we are talking about a total of 20 or 30 euros per year)

Basically every bank has some kind of "premium customer" program that you qualify for by having enough investments or loans from that bank and magically all your banking fees go away (obviously they just make their money from the services they provide for your investments/loans)

Banking fees? Never paid any as far as I can tell, not for the ordinary things. My bank here in Norway won't pay a bill if there isn't enough money in the account. It sends me a text and an email to say what happened and doesn't charge me anything.

The only fees I pay are a small percentage for management of mutual funds.

I’m assuming parent meant fees like X per month for having a debit/credit card or for access to “online” banking.

Yeah that is what I meant. Basically having online banking + debit/credit card. Also for under 2X years old (depends on the bank) they are usually free.

You are right I pay an annual fee for my credit card and debit card. No fees for using them or access to online banking. The bank is online only anyway.

UK banks are pretty heavily regulated. For example, the overdraft fee spiral has been banned and in many cases banks were required to pay compensation.

Yet we have quite a lot of banks to pick from - around 60 if you include building societies (more if you include private, niche and specialist banks). We also have a fair few new and digital challenger banks like Monzo, Starling, Atom, Revolut and arguably Metro Bank. If anything our banking system seems far more innovative than the US system.

I don't know about Canada, but clearly regulations don't mean that you can't have competition and innovation.

I could be mistaken about this, but I thought it had something to do with the UK’s relationship with the EU (and perhaps the US, as well?) that made the UK particularly attractive to financial industry.

There are a lot of things that are just plain better in the UK compared to the US. Out of network ATM fees being a big one.

See also regulation about what the incumbent last-mile network provider (Openreach) can charge ISP's to provide services on their lines which has led to a larger number of ISP's available in any one place (unless you're in Hull, because of historical reasons).

if ATM fees are important to you, you could always consider opening an account with schwab. they reimburse 100% of ATM fees.

as for ISPs, it's hard to do worse than comcast, but at least they don't block a wide range of content by default.

https://en.wikipedia.org/wiki/Web_blocking_in_the_United_Kin...

It was either "voluntarily block, or we'll force you to".

And the piracy site blocks are due to high court orders - not a lot an ISP can do in those cases.

It a uniquely American stupidity that somehow everyone just lives with. The concept of overdraft doesn’t even exist in normal consumer accounts anywhere else in the world. The first thing I do when I open an account here is to disable overdraft - but then you have to pay return cheque charges by whoever was trying to charge your account.

The history is that people used to write paper checks, and merchants would charge a bounced check fee. Overdraft _protection_ was actually a banking feature which would save you from the cost and embarrassment of a bounced check.

There is very nearly zero usefulness to overdraft protection in a real-time authorization world. Nobody charges a fee for a rejected debit authorization.

I suppose merchants might charge a return check fee for a failed ACH payment, but nobody uses ACH payments for anything routine in the US.

> nobody uses ACH payments for anything routine in the US.

Water bill, electric bill, mortgage, and property taxes are all ACH for me. Many people pay rent that way. I don’t think it’s commonly used for day to day interactions but a lot of payments are still ACH

The latest thing I've noticed is that if you attempt to debit, say, $100 from an account that has only $95, it will successfully debit $95 and then the POS equipment will show that you still need to find some other way to pay the remaining balance. Used to be in this situation it would just be rejected outright.

It's more handy for gas pumps, but less transparent. It stops before your tank is completely filled, but doesn't say why. You can hear the difference if you are standing there while it fills, of course, but other than that you may be confused why it slowed down and stopped exactly at a certain amount and won't go any farther.

Consumers don’t use ACH for very much. Businesses utilize ACH a lot, because despite the additional time lag, it’s free.

We have exactly this concept in normal consumer accounts in the UK. It is not uniquely American.

Overdrafts are very much a thing in the UK, most accounts allow it, but you have to request it in advance. In effect they work like a pre-approved loan, which at least when I was working badly paid jobs and needed food right up before payday was a very welcome feature.

With both HSBC and RBS if I didn't have an overdraft in advance they just hit me with an even larger "unapproved overdraft fee" — both refused to disable overdrafts & just bounce the payment instead

Netherlands has overdraft if you request it, otherwise the payment would fail / card declined. But we don't have overdraft fees, that's the weird American thing that caused all those crazy optimizations like reordering transactions.

The way it works in NL is you pay a (high like a creditcard) interest rate for every day the account is below zero. The transaction order doesn't matter it looks at the balance at the end of the day and charges you 1/365th of 13% interest.

The only way banks fuck you over in this system is with the dates. Using a card means a transaction date of "today", getting paid almost always has transaction date tomorrow. So you end up paying 1 day of interest. Much less than a $ 40 overdraft fee and regardless of the number of transactions.

Oh boy no. Canada has only a handful of banks, minimal competition (they make money hand over fist) and customers get bent over on a regular basis.

Canada sure learns a lot of tricks from their big brother.

What’s hilarious is Canadians banks can come up with that all on their own.

My Canadian bank (rbc) doesn’t charge me any fees outside of interest if I keep a negative balance for going into my overdraft.

Yes, that's exactly what they would do. Even better (for the bank's profits) is if you had lots of other smaller transactions that day too. They would re-order everything from largest-to-smallest, so it's:

1. have $10 in your checking

2. pay $9 for steak

3. buy sausage for $5

4. charge overdraft

5. buy milk for $3

6. charge another overdraft

7. pay $2 for parking

8. charge another overdraft

9. buy a pack of gum for $1

10. charge another overdraft

11. count $500 deposit

It was truly despicable behavior that benefited nobody but the banks.

Dear gawd. I've never heard of this shit before and hope it's not a thing anywhere else. Amazing it's all legal. That's the very definition of fraud

I may be wrong, but I think this is now illegal in the US. I haven't heard of it in a while, at least. But it's also been some time since I left little enough in my account that it could happen to me, or banked at a shitty bank that would even do it to begin with.

Banks "voluntarily" stopped doing it once regulators got serious about forbidding it and then the regulations never actually happened, so while it's not currently a thing anyone does it probably will be again some time in the future.

I know Chase and USBank always credited deposits first (going back to about 2006).

What is the time period for reconcilling transactions? Is it reordering them per a 24 hour period? Or is every bank settling them differently.

Yes they reordered transactions to maximize their money. E.g. you have $495 in the account, and you spend:

-$5: $490 left

-$5: $485 left

-$5: $480 left

-$500: -$20 left, overdraft fee of $40, $-60 left.

They will reorder it as:

-$500: -$5 left, overdraft fee of $40, $-45 left.

-$5: -$50 left, overdraft fee of $40, $-90 left.

-$5: -$95 left, overdraft fee of $40, $-135 left.

-$5: -$140 left, overdraft fee of $40, $-180 left.

Wow.

Yeah, the bank employees involved in this should go straight to jail.

And of course even if you deposited a check that day it wouldn't clear until the next business day so you'd pay a negative account balance fee for three days before your money hit.

I left a comment about how this happened to me... 8 years ago, wow https://news.ycombinator.com/item?id=6424493

Germany here as well. I have never heard of event-based overdraft fees, only interest-based. Which makes this transaction reordering pointless

Because it's not true, check the largest consumer banks:

https://www.postbank.de/dam/postbank/pdf/privatkunden/Postba... https://www.deutsche-bank.de/dam/deutschebank/de/shared/pdf/... https://www.commerzbank.de/portal/media/efw-dokumente/preisa... https://www.hypovereinsbank.de/content/dam/hypovereinsbank/s... https://www.ing.de/girokonto/konditionen/ https://www.diebank.de/content/dam/f0032-0/PDF_neu/preisaush... (Volksbank) https://www.ksklb.de/content/dam/myif/ksk-ludwigsburg/work/d... (LBBW)

In this sample, if overdraft is enabled, you pay up to 15% p.a., if disabled the cancellation fee is up to 2€ for the postal notice, but mostly just porto (0,80€).

My German back account has overdraft, but that only charges via ~12% annual interest (billed at end-of-month, but charges proportionality if you've been in the red for part of the month).

Also note that for ATMs (including deposits) and within-bank transfers, we had no more than a couple seconds latency since €, which got expanded for all willing banks to cross-bank push transactions specifically requested to be "SEPA instant push".

The "SEPA instant push" transactions have some issues with reversing in case of accidentally fat-fingering IBAN (target account; like a crypto wallet address but no crypto) or amount. Once the money is in the target account, you basically have to go to court if it wasn't outright fraud. And being instant removes the window you had to call your bank and cancel the transfer. IIRC there are some further liability shifts.

And yes, this transparent interest-based handling is why we get by perfectly fine without credit cards.

Exactly the same in the Netherlands. Didn't even know the Americans got screwed so badly.

I think it was more like

1. have $100 in your checking 2. pay $10 for steak 3. buy sausage for $5 4. Buy a ticket for $99

You think you get one over draft fee

bank reorders it as

1. have $100 in your checking

2. Buy ticket for $99

3. buy sausage for $5

4. Pay 10 for steak

Get 2 over draft fees. Add more transactions in between the ticket purchase to increase the fees.

This thread assumes intentional reordering not that the transaction arrive at the bank out of order

I have transactions that show up out of order to the event time. Thou I wouldn’t put it past some smaller banks in low regulation geographies

I think it's pretty well documented that intentional reordering happens and still happens

Should not that cause legal action - duly and factually?

Only if it's illegal.

It's a scheme with the purpose of theft.

You cannot have law as a list of specific cases: it must be based on patterns - "All arbitrary appropriation is forbidden and sanctioned", then further made into distinct categories to substantiate and differentiate the amount of gravity. All theft is illegitimate.

When the transactions 'arrive' in the bank's system should be immaterial, as they should be timestamped at the moment the card is swiped, matching the date and time the printed receipt I am handed has.

Regardless, the bank's mission is to make money, and they can make a lot more of it by adversely reordering transactions in their favor, it is not at all a reach to assume that they do so, and in fact have done so and may well continue to.

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