Have you ever checked your bank statement and noticed something doesn’t look right? Maybe you see a charge for something you didn’t buy or a deposit for the wrong amount. These bank errors can have a significant impact on your finances, especially if they happen at the wrong time of the month.
Rare though they are, bank errors can happen for a variety of reasons. But it’s vital you look out for them to avoid paying more than you owe, missing a payment, or even having your account frozen.
Fortunately, if you know what to look for, they’re not tough to spot.
Common Bank Errors: How to Identify, Avoid, & Correct Them
Banks are responsible for managing their customers’ money and ensuring they process transactions accurately. There are lots of safeguards to prevent errors, including both human and machine screening. But these mistakes can and do happen, so be on the lookout.
1. Wrong Withdrawal or Deposit Amount
Let’s say you deposit a check for $50, but the bank teller accidentally credits your account for $500 instead. That’s a big difference, and if you don’t catch it, you could end up spending money you don’t have then have to pay it back.
Identify It: Compare all your receipts or your check register entries against the amounts in your bank account to ensure your expectations match reality.
Avoid It: Double-check all your transactions before submitting them. Ensure your handwriting is legible and that you enter the correct amount and verify it matches what you intended to deposit or withdraw.
Correct It: Contact your bank immediately. You may need to provide documentation or evidence of the mistake, which is why it’s a good idea to keep any relevant paperwork or receipts of your transactions.
2. Duplicate Transactions
Duplicate transactions occur when the bank processes a transaction twice, resulting in two charges or withdrawals for the same amount to the same payee.
Identify It: Compare all your receipts or your check register entries against the transactions in your bank account, checking them off as you go, to ensure they appear only once.
Avoid It: Track your transactions and review your account statements regularly. If it’s the result of human error, such as running two transactions when one appeared to fail, it’s easier to remember what happened if the transaction is fresh in your head.
Correct It: Contact your bank as soon as possible to initiate an investigation. In the meantime, avoid using the affected account, if possible.
3. Direct Deposit Failure
The way ACH payments work these days, direct deposits should generally show up on or before the day you expect them. If they’re late, it’s because there’s a problem with the transaction, even if it’s just because the depositor started the process too late.
Identify It: Check your online bank account the day you expect the payment. If you’re not sure, you should generally receive it within 24 hours of the time they process the payment. If you don’t see it, assume the issue is on the part of the payor since it probably is.
Avoid It: Double-check your account information and routing number before submitting it to your employer or client. You should also keep your account information up to date and immediately notify payors of any changes.
Correct It: Check with your employer or client to ensure they have the correct account information and submitted the payment on time. If the payor can’t find any issues (or won’t admit to them), it may become necessary to contact your bank to see if they can identify any issues on their end.
4. Automatic Bill Pay Error
You can set up automatic bill payments through the bank (called bill pay) or directly through the vendors (autopay) to ensure you don’t miss any payments or send them late. It’s a really convenient way to pay bills, assuming the payment goes out.
Identify It: Automatic bill payments should show up in your account just like any other transaction. So if you don’t see it or it shows as a pending transaction, it hasn’t gone out. They may go out early if the payment date falls on a weekend or holiday.
Avoid It: Double-check your payment settings to ensure you have the correct payment amount and due date entered. You may need to adjust pay dates to ensure they go out no earlier or later than necessary. You should also monitor your account and review your bills regularly.
Correct It: Contact your bank and the biller as soon as possible. They can help you identify the issue and work to resolve it. You may need to provide additional documentation or information to help resolve the issue.
5. Unrecognized Charges or Fees
Unexpected charges and fees appear on your statement without your knowledge or approval. They can be small or large amounts and are often easy to miss. However, just because you don’t recognize them doesn’t mean they’re truly errors.
Identify It: As you’re double-checking your transactions, make note of any transactions you don’t recognize or can’t back up with a receipt and skim through for non-transactional fees.
Avoid It: Review your account statements regularly and keep track of your transactions. If you see any charges or fees you don’t recognize, investigate them immediately. You can also set up alerts on your account to notify you of any transactions or changes to your account. Also make sure you read any correspondence (paper or electronic) from your bank. It may alert you to upcoming changes, such as monthly charges on your account type.
Correct It: Contact your bank and provide them with information about the unrecognized charge or fee. They can help you investigate and correct the issue. Keep a record of all communication with the bank and any evidence you may have about the error.
6. Overdraft & Non-Sufficient Funds Fees
Overdraft and non-sufficient funds fees occur when there’s not enough money in your account to cover a transaction. But they’re not always legitimate or fair, and sometimes, they may even be illegal.
Identify It: These may be labeled “overdraft” or “NSF.”
Avoid It: Monitor your account regularly. Set up alerts to notify you when your balance falls below a certain amount. You can even opt out of overdraft protection to prevent overdraft fees altogether, though that may cause payments to decline.
Correct It: Contact your bank to discuss options for reversing the fee. Calmly lay out why you think the fee is incorrect, unfair, or illegal. If they won’t budge, some banks offer overdraft forgiveness programs (and there’s always legal action if you’re truly aggrieved). Keep a record of all communication with the bank and any agreements made. Preferably, get it in writing.
7. Incorrect Interest Rates or Calculations
Your bank may have promised you a certain interest rate, but your statement shows a different rate. Or perhaps (although unlikely), the bank has miscalculated the interest on your account, resulting in a lower balance than you expected.
Identify It: Do the math yourself. You can look online for formulas or online calculators you can use to double-check the bank’s work.
Avoid It: Read the fine print before signing up for any account, and ask for clarification on anything you don’t understand. Review your account statements regularly and double-check the interest rates and calculations.
Correct It: Contact your bank and ask them to provide an explanation and correct the issue. You may need to provide evidence, such as the original terms and conditions, to support your claim. It’s smart to keep a record of all communication with the bank and any agreements made, preferably in writing.
Causes of Bank Errors & Mistakes
It’s important to be aware of what causes bank errors so you can prevent them from happening. The most common causes of bank errors are:
- Human error. Mistakes can happen when bank employees manually process transactions, such as entering incorrect amounts or selecting the wrong account.
- System glitches or technical issues. Computer glitches or other technical problems can cause incorrect transactions or charges.
- Miscommunications. Misunderstandings or lack of communication between banks and their customers or customers and other people can lead to errors. For example, if a customer doesn’t update their account information, the bank may send direct deposits to the wrong account.
- Fraudulent activity. Fraudsters can use stolen information to make unauthorized transactions on a customer’s account. These can sometimes be difficult to spot and require immediate action.
While banks have measures in place to prevent both errors and fraud, mistakes can still happen. Being aware of the causes and prevention strategies can help you avoid them.
Preventing Future Bank Errors & Mistakes
The best way to avoid bank errors is to prevent them from happening in the first place. Just take these common sense steps to reduce the risk of errors on your account:
- Double-check all transactions. Before submitting any transactions, whether it’s a deposit or withdrawal, ensure you’ve entered the correct amount. For automatic payments or transfers, review the settings and ensure they’re correct.
- Keep track of account balances and upcoming payments. Regularly monitoring your account can help you identify errors early and avoid overdraft fees or missed payments. Set up alerts to notify you when your balance falls below a certain amount, when payments are due, and when they go out.
- Communicate clearly. If you have any doubts or questions about a transaction or your account, reach out to your bank for clarification. Be specific and provide all necessary information to help them assist you.
- Review your account regularly and report errors promptly. Reviewing your account or at least looking at the monthly statements regularly can help you catch errors or fraudulent activity early. If you notice any errors, report them to your bank immediately and provide any relevant documentation or evidence.
- Save all receipts and paperwork. Keep all your transaction-related receipts and paperwork until you’re sure you no longer need them. The IRS requires you keep tax return-related financial records for three years. You don’t necessarily need every receipt that long, but it makes it easy. You can use computer software to scan it and keep it electronically to save room and make it easier to search.
By following these prevention strategies, you can reduce the likelihood of both errors and fraud. Remember, catching errors early is key to avoiding financial consequences. The more time that passes, the harder it may be to sort out and more likely that memories fade.
Final Word
Bank errors are an unfortunate reality of modern banking, but you can minimize their impact on your finances. By monitoring your accounts regularly, double-checking transactions, and promptly reporting any errors or fraudulent activity, you can catch and correct mistakes before they cause serious financial harm.
It also helps to educate yourself on related topics, such as interest rates and fraud prevention.
Source: moneycrashers.com