Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

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

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.94%4.01%
15 yr fixed3.13%3.14%
5/1 ARM3.14%3.15%
30 yr refi3.95%4.05%
15 yr refi3.20%3.16%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 20,821.76 11.44 0.05%
Nasdaq 5,845.31 9.80 0.17%
S&P 500 2,367.34 3.53 0.15%
Treasuries 2.32 -0.07 -2.97%
Data as of 2:33am ET
Company Price Change % Change
Bank of America Corp... 24.23 -0.35 -1.42%
Spectra Energy Corp 40.68 -0.32 -0.78%
Chesapeake Energy Co... 5.66 -0.09 -1.57%
Hewlett Packard Ente... 22.96 -1.70 -6.89%
Ford Motor Co 12.47 -0.09 -0.72%
Data as of Feb 24

Sections

Baltimore Orioles executive John Angelos said he would want President Trump to apologize for all the offensive comments he's made before he's invited to throw out the first pitch at Camden Yards. More