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Important Information About Overdrafts
IMPORTANT INFORMATION FROM FIRST STATE BANK ABOUT OVERDRAFTS AND MANAGING YOUR DEPOSIT ACCOUNTS
OVERDRAFTS: HOW THEY OCCUR AND WHAT HAPPENS
What is an overdraft?
An overdraft occurs when a debit transaction exceeds the “available balance” in your account and we still approve the transaction. Any item posted as a debit to your account can result in an overdraft. Debit transactions can include:
- Writing a check;
- Authorizing an automatic payment from the checking account to pay for recurring expenses such as utility bills, mortgage payments, gym memberships, etc.;
- Paying for purchases with a debit card;
- Making withdrawals from an automated teller machine (ATM).
what is an available balance?
The available balance is the amount of money in your account, minus any holds (such as outstanding debit card authorizations) and deposits that are not yet available due to the bank's funds availability policy. It does not include checks you've written that have not yet cleared, pending online bill pay transactions, or pre-scheduled debits (e.g. health club dues automatically debited from your account at a certain time each month).
Your available balance can fluctuate during the day as it is updated to reflect transactions you make, such as cash deposits, direct deposits, account transfers, withdrawals and debit card purchases. You can check your available balance at a First State Bank ATM, by accessing your account through On-Call Telephone Banking, Online Banking, or Mobile Banking, or by speaking to a representative at any of our locations.
Can I overdraw my account at the ATM or with my debit card?
We do authorize and pay overdrafts on checks and other transactions made using your checking account number, and automatic bill payments. We do not authorize and pay overdrafts for ATM transactions and non-recurring debit card transactions unless you ask us to. If you have asked us to pay overdrafts on ATM transactions and non-recurring debit card transactions, and you no longer want us to do so, please call us at 866-408-3582 or visit your nearest First State Bank location to opt out of this service.
what is an outstanding debit card authorization?
An outstanding debit card authorization is the amount immediately deducted from your available balance while the bank waits for the final settlement request from the merchant, which can take several days. A final settlement request is an instruction from the merchant to the bank to deduct the exact amount of your final purchase. It follows after the debit card authorization request and completes the transaction. While the majority of transactions are settled within one business day, the actual timing rests with the merchant and is out of the bank’s control.
Keep in mind, until the final settlement, the outstanding authorization amount may be larger or smaller than your actual purchase amount. In some cases when final settlement is delayed, the outstanding authorization is released, which causes your available balance to appear larger than you might otherwise expect.
It is very important to understand that you may still overdraw your account even though the available balance appears to show there are sufficient funds to cover a transaction that you want to make. This is because your available balance may not reflect all your outstanding checks, bill payments, or other transactions that you have authorized but have not yet been paid (or pre-authorized) from the account. In addition, your available balance may not reflect all of your debit card transactions. For example, if a merchant obtains our prior authorization but does not submit a one-time debit card transaction for payment until after the preauthorization hold has been released from the account, the available balance would not be reduced by the amount of this transaction from the time the hold was released until the transaction was received by us and paid from your account.
Can an outstanding debit card authorization result in overdraft fees for me?
A merchant's outstanding debit card authorization request will alter the available balance in your account. If, as a result, your available balance falls below zero, then overdraft fees will be charged for any transactions that post to or clear your account. For example, a debit card authorization may lead to overdraft fees in certain circumstances:
- Those who spend the funds in their account, anticipating a delay between purchase and settlement, may experience an overdraft fee. This is because the outstanding debit card authorization reduces the available balance in the account even though the actual purchase has not posted yet.
Fred has a $100 available balance and makes a $75 debit card purchase. His available balance will be
immediately reduced by $75, or the amount of the outstanding debit card authorization. If he makes another purchase or
withdrawal beyond the remaining available balance of $25, it will result in an overdraft fee.
- If a merchant obtains an authorization for your debit card, but then your purchase is paid for by other means, the merchant must submit a reversing transaction to remove the debit card authorization. If they do not do this, the available balance will be reduced until the hold expires, normally two business days.
Wilma has $250 in her account and uses her debit card to pay $175 for theater tickets. She decides, after the card
is swiped, to pay by cash. The theater operator does not reverse her debit card authorization immediately and her
available balance is reduced by $175. That night, a $200 check she had previously written posts to her account. As a result
the account is overdrawn and a fee is charged.
Will the debit card preauthorization hold always equal the exact amount of my transaction?
No. Some merchants, especially gas stations, hotels and sometimes restaurants, will preauthorize an amount that is higher or lower than the acutal puchase amount. For example:
Gas stations: Many gas stations preauthorize transactions for amounts ranging from $1 to $100 because they do not know
how much gas you will actually pump in advance of your transaction. If they preauthorize $100, we will place a hold for
$100, even if your actual transaction is only $45. The gas station must send the final transaction amount which will cause
the hold to be for the correct amount.
Hotels: When using a debit card to make reservations in advance, hotels generally will preauthorize an amount equal to an
overnight stay, or more, depending on the length of your stay. This will result in a hold on your account up to 72 hours.
Then, when you actually arrive, the hotel will place another preauthorization, often larger than the cost of your stay to
cover possible incidental expenses.
Car Rental Companies: When renting an automobile, most car rental companies will authorize an amount greater than the
actual cost to cover any additional expenses.
Restaurants: Many restaurants authorize an amount that is slightly larger than the bill in the event that you include gratuity
on your card transaction. Alternatively, the restaurant may authorize the amount of bill which does not include any gratuity
you may add.
How will I know if a debit card preauthorization hold has been placed?
Your preauthorized transactions will appear as Pending Transactions within First State Bank’s Online Banking. You can also obtain your available balance through On-Call Telephone Banking, Mobile Banking, First State Bank ATMs, or by speaking to a representative at any of our locations. In addition, you may use Online Banking alerts to notify you via email when your account reaches a balance threshold you specify.
What fees will I be charged if I overdraw my account?
We may, at our discretion, honor transactions that overdraw your account, or we may decide to return the items to the payee. In either case, you will be charged an Overdraft Fee or Returned Item Fee of $37.00 for each item. Even if we do decide to pay an overdraft item, we are not obligated to pay overdrafts that occur at a later date. The payment of overdrafts is never guaranteed
What is an Overdraft Fee?
An Overdraft Fee of $37.00 will be charged when a debit transaction posted against a deposit account exceeds the available balance and we choose to honor the transaction and allow it to post to your account.
What is a Returned Item Fee?
A Returned Item Fee of $37.00 will be charged when a debit transaction posted against a deposit account exceeds the available balance and we choose to return the item to the payee.
Pursuant to NACHA Operating Rules and Guidelines and other applicable laws, a debit or item may be presented for payment more than one time. We may charge you a returned item fee for each resubmission of a debit or representation of an item, which means you may incur multiple returned item fees if a debit or item is returned more than one time. For example, you write a check from your account with us. The check is returned for non-sufficient funds, and we may charge you a returned item fee. The same check is then represented to us for payment, and the check is returned again for non-sufficient funds. We may charge you a returned item fee the second time the check is presented for payment and returned for non-sufficient funds.
If our final decision on the item(s) caused your account to become overdrawn, you should make a deposit as soon as possible to bring your account to a positive balance. If your account balance remains negative for 45 days, we may close your account and it will be reported to a consumer reporting agency. These actions may disrupt your ability to obtain a deposit account at another financial institution, and they may damage your credit rating.
What is an Overdrawn Balance Fee?
If, on any day, your account is overdrawn, you will be charged an Overdrawn Balance Fee equal to the overdrawn amount multiplied by a daily periodic rate of 00.02191.
De minimis Transactions (for consumer customers only):
If your transaction creates an overdraft of less than $5.00, we will not charge a fee for the item. Additionally, if any individual overdraft transaction is less than $5.00, we will not charge a fee for the item.
Daily Aggregate Fee Limits (For consumer customers only):
When we pay or return an item that overdraws your account, we will not assess more than five Overdraft Fees/Returned Item Fees in a single business day.
How transactions are posted to your account
To keep the most accurate record of your account balance, it's important that you know how different types of transactions are posted to your account, and in what order. Transactions are posted to your account in the following order:
Credits: Items such as deposits, credit transfers, incoming wires, and ACH credits.
Deposits are generally added to your account when we receive them. However, in some cases when you deposit a check, the full amount of the deposit may not be available to you at the time of deposit. Please refer to the Funds Availability Policy Disclosure provided at the time you opened your account for details regarding the timing and availability of funds from deposits.
Debits: Transactions may not be posted in the order in which you made them due to the processing timelines of the Federal Reserve System and other delays which occur in the ordinary course of business. We will pay transactions that are presented during the day in the following order:
- Payments to a First State Bank loan account
- Internal withdrawals not made with a check
- Withdrawals at an ATM and corresponding foreign ATM fees if applicable in low-to-high dollar amount order
- Pin-based debit card transactions in low-to-high dollar amount order
- Signature-based debit card transactions in low-to-high dollar amount order
- ACH transactions in low-to-high dollar amount order
- Checks by ascending serial number order
- Service charges
- Other fees
How to avoid overdrafts
The best way to avoid overdraft fees and returned item fees is to manage your account carefully. If you do not reconcile your account balance on a periodic basis and have a good understanding of the approximate balance you should have, you may inadvertently overdraw your account if you rely solely on balance inquiries from Online Banking, Mobile Banking, On-Call Telephone Banking, ATM, or a bank teller. Here are some simple steps to help you avoid overdraft fees or returned item fees.
- Record all checks in your check register when you write them.
- Pay special attention to electronic transactions. If you use an ATM to withdraw cash or your Debit Card to make a purchase or get cash back, be sure to record the transaction in your register.
- Don't forget about automatic payments. If you have automatic payments and deductions from your account, such as your mortgage payment or health club fee, remember to set aside money for them and to record them in your register.
- Don't forget about fees or service charges, and record them in your register.
- Review your account activity and statements carefully. With Online Banking, you can view transactions and monitor account activity, 24 hours a day, 7 days a week. When reviewing your account activity, remember that some checks and payments may not have cleared or posted to your account yet.
- Set up alerts using Online Banking. You will receive an automatic email alert to notify you if your account balance goes below a threshold that you set.
Less Costly Options:
In addition to our discretionary overdraft program, we also offer other options which can be less costly than Overdraft Fees and Returned Item Fees:
- Overdraft Line of Credit – This is a revolving credit product that automatically transfers money to your checking account when you overdraw, subject to your credit limit. You must apply and meet credit eligibility requirements. An annual fee is charged, and interest will accrue on the outstanding balance of the line of credit.
- Linked Savings Account – A First State Bank savings account is linked to your checking account. When you overdraw your checking account, we automatically transfer money from your savings account to cover the overdraft, subject to the savings account balance.
To discuss other options regarding your deposit account management, call 866-408-3582 during business hours or come in to your nearest First State Bank location.
Financial Education and Counseling:
If you are facing financial challenges and unable to manage your account effectively, you may want to consider accessing free or low-cost financial education workshops or individualized financial counseling. Visit the Federal Trade Commission’s website for more information at https://consumer.ftc.gov/articles/how-get-out-debt. You may also want to contact the National Foundation for Credit Counseling at 800.388.2227.