Citigroup, the fourth-largest US bank by
deposits, is to change the order in which it clears customers’
cheques and electronic payments, from low to high.

From 25 July, Citi will begin clearing cheques
and automatic payments with the smallest amounts first; as a
result, Citi will reduce the potential for multiple overdrafts and,
consequently, charge less in overdraft charges.

Citi, in common with the majority of its
rivals, has historically processed cheques from high to low.

This arrangement has been hugely beneficial to
the banks.

It has increased the chance that customers
will get hit with overdraft charges, if they write a number of
cheques or make multiple debit card or electronic payments in a
short timescale.

As the larger cheque is cleared first, it has
maximised the opportunity for the bank then to charge multiple fees
as smaller cheques and payments are processed.

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The FDIC and US consumer groups have long
campaigned against current bank charging strategy.

Citigroup is the first of the major US retail
banks to announce a change in its terms and conditions.