Stupid Tax Tuesday – The Anatomy of an Overdraft

December 11, 2007

In spite of my efforts to stop making dumb financial mistakes, I occasionally pull off a big one, like I did last week. This is a classic case of failure to communicate with your spouse. Or more accurately, failure to remember the communication.

I am generally the one that manages the finances, and am responsible for entering our transactions into Quicken on a daily basis. Were pretty good at communicating about what we can spend and my wife usually leaves the receipts for her stuff on the desk so I can do the Quicken thing.

We rarely use checks, but when we do, she usually tells me the check number and amount. Well, this week revealed some weaknesses in our communication plan. She wrote a check, told me about it, I forgot about it, the place cashed it the day before my direct deposit went in, and we overdrafted. Big time.

Here’s the 4 transactions:

As you can see, it was a check that caused 3 subsequent pending transactions to overdraft my account when they cleared. As a result, the fees came flying in the next day for all 4 transactions:

We use Bank of America as our primary checking account, and I’m very happy with the service, and the online interface for bill pay. but when I called to plead for mercy, they wouldn’t budge too much, saying this is the second time I’ve overdrafted in a year, hence no mercy. I can’t recall the first one (another memory failure perhaps?), but they were nice about it and refunded $20 of it anyway.

The result?

$120 in overdraft fees, including a $20 refund for a prior offense resulting in:

• a $41.72 bottle of shampoo from Walmart, originally $6.72
• a $40.12 chicken sandwich combo from Wendy’s, originally $5.12
• a $38.21 happy meal from McDonald’s, originally $3.21
• paying $130 for some groceries that should have been $115

The Plan?

1. My saving account is linked to my checking account so my plan is to build it up to $1000 and use it as my overdraft account, in case this happens again. I’ve already set up a automatic transfer to my saving account every week so this should happen without me having to think about it.
2. Have my wife write down on a piece of paper, the checks she’s written, so I can’t miss it.

Depressing? Yes. With this mistake, I think I’ve easily wiped out more than 2 years worth of interest that I earned from all my savings accounts. I’m trying not to dwell on it too much, but that money was slated for Christmas presents, and it hurts.

Photo by Wellzee

Posted in Life, Stupid Tax Tuesday