Ask Blair...Payment Order of Checks

Q. Blair, with all the talk about charges for overdrafts, what is your suggestion on the payment order of checks?


A. Relative to the payment order of checks, I have always recommended paying high to low. The regulations allow paying in any order that you wish and i think that high to low is reasonable. Many banks are now expanding that to all items if your automation system will accommodate it. That is you integrate all of your items and pay the largest first and so on regardless of whether the item is a check or an electronic item. One other thing, I recommend that you do not charge overdraft fees to the account until all items have been settled. For example, if I have $405 in my account and there are two items presented, one for $500 and one for $400. If you process the $500 item first and assess an overdraft fee then there are not enough funds remaining to process the $400 item because of the overdraft fee.