Can you not ask the bank not to do this, though?

Now in the USA as of 2012, banks cannot turn on overdraft protection on a debit card unless the customer requests. Prior to this they were taking your day's debits and applying the largest one first. So suppose you bought lunch for $10 and a coffee for $3 then your cable company later in the day billed you for an amount in excess of your account. They would then apply the cable company bill first, then the 2 smaller charges to maximize overdraft fees and hit you with 3 $30 charges.

The order wouldn't matter in that case, would it? Either way it's still deducting the sum of those three transactions at the end of the day.

I thought what they were doing is applying all your debits, charging you if that puts you into overdraft, and then applying any credits. If they applied the credits first, you wouldn't go below zero.

The order still matters. If you have $20 in your account and get hit with three debits for $6, $10, and then $30, processing them in order means the $6 and $10 debits go through, leaving you with $4 in the bank, then the $30 debit causes an overdraft and a single fee. Comparatively, processing the $30 debit first immediately causes an overdraft, and the $10 and $6 debits cause two more overdrafts for three total fees.

Either way, you're trying to charge $46 against an account with $20, but one method results in 1 fee and one method results in 3 fees. The issue of credits vs debits you mentioned can compound this issue.

I had this happen to me in real life, back as a broke college student. The difference is the number of transactions you get hit with the overdraft fee for.

Consider a bank account with $20 in it, the day before payday, when you forget your World of Warcraft subscription hits today instead of tomorrow. That's $15. But you buy:

  * Lunch: $5
  * Coffee: $2
  * Dinner: $5
  * A late-night snack: $5

Then, the subscription hits at midnight.

If the transactions happened in-order, the subscription causes the overdraft, and you're charged $25 or whatever (yeah they are very high). But in the way banks used to do it, they'd take your total ledger for the day, and order it by highest $ first. So, subscription first, $5 left. Lunch, $0 left. Coffee, dinner, and snack are three transactions when overdrawn, so that's $25 * 3 = $75 in fees instead.

Banks claimed that this process was because you'd probably want your highest-amounts paid first, as it'd be something like rent money. In the end, it means way more fees for them, though.

$75 in fees is especially brutal when you don't have much money in the first place; it pretty much caused me to not be able to even go to 7-11 for a candy bar for two months.

I have been told that that law only applies to consumer accounts, not business accounts.

Yes, you can. The last few banks accounts I've created have all asked if I wanted overdraft protection. You say "NO! decline ANY transaction that would cause an overdraft"

But they seem to be able to delay debits for several days, perhaps a week? At least on WellsFargo. Isn't this a backdoor/loophole to get around the no overdraft issue?

Not sure who you bank with but our bank will bounce it if honouring it would require going overdrawn beyond €500.

There are limits to overdraw facilities, sure. But they are also included by default in many accounts.

You can usually have them turn off the ability to overdraw.

This is why no reasonable person should use debit cards for recurring payments.

I'd advise not using debit cards for anything, under any circumstances, and relying on the better protections that credit cards provide, but it's a losing battle. My debit card is ATM-only.

You're right and the trick is setting up a separate account for the debit card (ideally with a different bank).

This is generally a good approach for all sorts of reasons, not just protection from over enthusiastic cloud bills.

Keep most of your funds in one bank (and never use the cards). Transfer from this account to one or more other accounts with other banks and use the cards on these secondary accounts to pay for things. This way you're protected from suppliers over billing and banks going crazy with unarranged overdrafts (which aren't secured so absolute worst case you just tell them to fuck off and default on it).

Basically, the trick is holding on to your cash. Much harder to fix things rapidly if you're having to negotiate with a third party between you and the supplier (which is the case with a credit card company).