In your own words, explain how debit resequencing works.

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In your own words, explain how debit resequencing works.

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Hồng Cúc 3 months 2021-08-12T23:30:50+00:00 1 Answers 32 views 0

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    2021-08-12T23:32:44+00:00

    Answer:

    Explained below.

    Step-by-step explanation:

    Debit resequencing is a practice whereby a bank will process the debit and credit to an account in such a way that it causes account balances to fall faster which in turn leads to a boost in potential overdraft fees.

    This is how it works;

    For example, if you send two cheques on a given date — one sent to your credit card company for $300 and the second one sent to your local electric company for $150, the credit card company and the local electric company will try to get their money from your account on the same date. Now, you’ve set up an automatic withdrawal to pay your rent which also hits your account with your rent being is $600.

    Now, if on the date that those three amount of money above hits your account, you have a balance of say $175, the bank could clear the $150 charge first, thereby resulting in two overdraft fees.

    However, Instead of that process above, many banks use a software that reorders the transactions. This software will first of all present the $600 charge, followed by the $300 charge and then finally the $150 charge. In this way, you will end up paying three overdraft fees rather than just two. Banks normally use this method in order to maximize profit rather than with the aim of pleasing their customers.

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