Keeping track of checking accounts can help save money

Failure to balance check books or track account balances could lead to pricey overdraft fees students may not realize until it’s too late.

Authorized holds occur when banking industries hold a balance as unavailable until the transaction amount is cleared by the merchant.

In the case of debit card use, authorized holds may last anywhere from one to five days. Credit card holds may last up to a month, depending on the bank policy.

In some cases, customers are not informed at the time about authorized holds being placed on payments made at such places as ATMs, gas stations and grocery stores. Customers don’t see the withdrawal from their accounts right away, leading them to believe money exists where it doesn’t – which may result in overdrafts.

Jennifer Hall, a fashion merchandising major, experienced an overdraft when the Sephora cosmetic store held her payment for a month.

“I charged (the purchase) on my credit card, but my card was at the limit,” Hall said. “A month later the payment finally hit, but I didn’t check my bank account.”

Because of the mistake of not seeing when the transaction was finally processed, Hall overdrafted her account and had to pay Fifth Third bank’s overdraft fee of about $40.

According to a 2006 study conducted by the Federal Deposit Insurance Corporation, 81 percent of banks allowed overdrafts to take place at ATMs and point-of-sale or debit transactions. Most banks whose automated overdraft programs covered ATM and debit transactions informed customers of a non-sufficient fund, or NSF, only after the transaction had been completed.

Hall, who has experienced multiple overdrafts, now questions whether she should venture to another bank or continue to pay Fifth Third bank’s fees.

Jerome Ellis, a Chase bank teller, said consumers have to be responsible enough to note transactions in their checkbooks or elsewhere in order to subtract the amount off of their account balance.

According to the FDIC study, consumer complaints about automated overdraft programs were received by 12.5 percent of banks that operated overdraft programs.

Ellis, who is also a student at Ohio University, admits managing money as a student is a struggle.

“Even when I first started college, I was absolutely horrible with a checking account,” Ellis said. “I was pathetic.”

Ellis said the goal for managing money is self-discipline: Keep a check register, and keep transactions in chronological order to note what is going in and coming out.

“As students, we need to make note of the deposits we make,” Ellis said. “It’s all about balancing.”

The FDIC study found accounts held by those ages 18 to 25 were the most likely among all age groups to encounter automated overdraft NSF activity.

“It sucks seeing students owe money to creditors or shipped off to collections, and it’s awful seeing students overdraft their account by like $300-$400,” Ellis said.

There are actions that can be taken to decrease the chances of incurring overdraft fees such as keeping track of charges; however, Ellis suggests students shouldn’t depend solely on Internet banking.

“You can look online at your transactions to see what’s going in and coming out, but if you don’t write it down on paper, then you’re going to be off somewhere,” Ellis said. “And once you’re off, it’s like a snowball effect.”

There is also the risk of recurring or scheduled payments deducted from accounts every month that people sometimes forget about, such as subscriptions to Netflix or utility payments.

Some banks offer multiple methods to warn customers when their account is depleted. For example, Chase bank offers free Chase Mobile alerts to notify customers when their account balance is getting low via phone text messages or e-mail.

Ellis stresses the importance of balancing checkbooks and knowing balances.

“You always need to know how much money you have and when it’s being used,” Ellis said. “Just be aware.”

Contact student finance reporter Kristyn Soltis at [email protected].