The banks say that MC/Visa payments that are “pending” for a couple or three days, not actually hitting the account, are unavoidable. If you get a prepaid Visa account, though, for which payments are processed through the same system, the process is locked down. Any purchase which would create a negative balance is declined when the charge is attempted.

And, guess what the prepaid card issuers’ motivation is for making sure overdrafts don’t happen? The cards aren’t technically issued by banks, and while some of their features resemble checking accounts, banking regs require that the prepaids not pretend to be checking accounts. One of the ways that is accomplished is by never going negative and guaranteeing that overdraft charges cannot occur.

So, once the Visa/MC folks would lose their own money if an account went negative, they have the means in place to ensure it never happens. (The prepaid cards make their money by charging outrageous fees in other areas, like the $5 transaction fee to add cash to the account.)

And, you’re on track in wondering whether banks have a clue that a direct deposit is pending. ACH deposits (payroll direct deposit, bill-paying services) happen via a 2-to-3 business-day process. If you get paid by direct deposit on Friday morning, it’s because your employer set the transaction up during business hours on Wednesday, approximately like this:

Wed 1pm: Employer tells its bank (XYZbank) that John Doe, account #1234 at bank ABCbank, is to be paid $456.00 on Friday.

Wed overnight: XYZbank feeds a transaction into the ACH system promising to put $456 into the system for account #1234 at ABCbank. It’s not a tentative commitment; the failure rate on these transactions is exceedingly low because XYZbank’s participation in the ACH system is dependent on it being reliable player.

Wed overnight: ABCbank receives the notice of the deposit destined for account #1234. Its obligation is to confirm that #1234 is a valid, open account, and if not, issue a reject notice during or before the Thursday overnight processing.

Friday: Regs are tighter for payroll direct deposits — the funds must be credited and available in John Doe’s account at the open of business. For other direct deposits, the funds must be available to John by early afternoon.

But, again, this is a highly regulated, low-error process. If XYZbank is handling payroll direct deposits for an insolvent employer, it’s not the employer who will take the hit, it’s the bank.

So, let’s re-frame this thought:

“I’m no banking expert, but my guess is that if Lee knew she had a deposit coming around the same time every month, then surely Chase must have known that too. A quick look at her record would have shown that. And certainly anyone who looked at her account long enough to see the pending transactions that would have hit after the deposit, would have seen that.”

This way:

Chase received a notice that a Lee had a deposit coming 24-48 hours prior, including the amount. It wasn’t coming via a check that might bounce, it was arriving thanks to a taxpayer-supported federal banking system guaranteeing that there was little reason to question the funds were real.

Cynically, Chase seems to be hiding behind regulations borne of low-tech banking from the past. They are not specifically required to credit Lee’s child support deposit to her account until later in the day, never mind that it is essentially guaranteed, so they drop it to the bottom of the pile, and process the charges against her account first.