Good news on overdrafts! Citi will pay small checks first

By Jessica Dickler, staff writer


NEW YORK (CNNMoney) -- For many Americans living paycheck to paycheck, it just got a little easier to avoid hefty overdraft fees.

As standard practice, banks process checks from largest to smallest, which means that if a large check overdraws an account, then each smaller check will too -- resulting in multiple overdraft charges, at nearly $30 a pop.

But on Monday, Citibank (C, Fortune 500) said it will start clearing smaller consumer checks first, giving a reprieve for those struggling to get by.

Citi's new policy of processing checks from smallest to largest will be effective July 25, 2011, although consumer customers will be notified this week, the bank said.

"It's a very consumer friendly policy," said Chris Viale, CEO of Cambridge Credit Counseling, a nonprofit consumer advocacy group. "With things being so tough for consumers out there and people living paycheck to paycheck you have to imagine this is going to be helpful for a large number of consumers."

The median fee for overdrafts is $27, even though the average overdraft is triggered by transactions totaling $17, according to the FDIC.

None of the other major banks plan to follow Citi.

A spokesman for Wells Fargo (WFC, Fortune 500) said its policy of clearing larger checks first ensures that big expenses like mortgage or car payments, which are often the most important, are cashed first.

Bank of America (BAC, Fortune 500) and Chase (CCF) said there were no plans to change the way checks are prioritized.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.94%4.13%
15 yr fixed3.04%3.08%
5/1 ARM3.55%3.40%
30 yr refi4.02%4.17%
15 yr refi3.10%3.14%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 16,614.81 215.14 1.31%
Nasdaq 4,419.48 103.41 2.40%
S&P 500 1,941.28 37.27 1.96%
Treasuries 2.24 0.03 1.27%
Data as of 9:10am ET
Company Price Change % Change
Regions Financial Co... 9.26 0.10 1.09%
Comcast Corp 52.19 0.89 1.73%
Applied Materials In... 20.78 0.71 3.54%
Kinder Morgan Inc 38.31 0.74 1.97%
Oracle Corp 38.35 0.55 1.46%
Data as of Oct 21

Sections

The midterm elections are around the corner, and the economy remains a top concern. With unemployment down and inflation low, why do people still feel the economy stinks? More

Yahoo was in the spotlight Tuesday as it released its third-quarter results, its first earnings release since the Alibaba IPO. More

Startups focusing on "ag tech," or agricultural technology, are gaining the attention of farmers and investors More

Foreign workers, lured by false promises of good jobs and benefits in America, soon find themselves enslaved in plain sight as victims of labor trafficking, a report from the Urban Institute finds. Here's how it can happen. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.