Big Checks Processed First

When you write a variety of checks, the big ones usually get processed by your bank first. You may have noticed this over the years. Assume that you've got several checks out there. They all arrive at your bank on the same day for processing. The bank will process the bigger checks first, then pay out for the rest of them. If your account happens to run out of money, those smaller checks may bounce. Why do they do this? Banks will argue that they want to make sure your bigger payments go to the recipient without a problem. Your bigger payments are probably the more important ones -- like your mortgage. While this may be true, you should be aware of the problem with this approach. Most likely you'll have fewer large checks and more small checks. This means that you'll have a greater number (and therefore larger total dollar cost) of bounced check fees or overdraft protection fees. By knocking out your account balance with the larger checks first, the bank can ding you over and over for overdraft protection. Moral of the story: know what you've got in your checking account and don't count on the float.

Further reading:

• How Overdraft Protection Plans Work
• Checking Account "Float"
• Consumerist.com on Check Cashing Order