OK I know what kiting is but we have a customer that uses credit cards (advances, checks, pulls cash out of ATM's) to cover her payments to the credit card companies. In the last three months it has grown from $1500 to over $4500. I am really worried because when the credit cards companies quit giving money for advancements WE are possible the last ones out and WE are going to eat the negitive balance.

Could we consider this kiting and shut her down or can someone give me advise on how to handle this?? I have already brought this up to a manager and she thinks it will be OK with the cash advances because they are still allowing her to get money but from my point, it's going to top out at some point and someone will be out. I think it is going to be us.

I forgot to mention this is a EVERYDAY transaction. In the morning she is in the negative by $4500.00 and then does the deposits of credit card checks, advances, cash out of Atm's to cover the negative balance. EVERYDAY!!HELP!

Not sure I'm clear on the problem:

Does she have a line of credit with your bank, or just overdrawing a checking account to cover payments elsewhere?

What is causing her account to become negative? Is there an overdraft tolerance that can be revoked so that you aren't paying NSF items? Are deposits being returned?

You could place holds on the credit convenience checks being deposited. (I read in other threads that some banks won't even accept these because of the risks they represent.)

I could be wrong, but if she's depositing cash you can't be the ones who are out once she makes the account good. If the CC is letting her get cash she must have it available on the card - otherwise the advance machine/ATM would decline. So once she makes good on the account - don't let it overdraw anymore for that day. Pay the checks that come through up to the avail. balance. Then return NSF.

Now if she is depositing checks I might get worried that one will be returned...then you could get stuck.

OK to make it more clear ~
Monday she had a check clear her account made to MBNA for $5000.00 and then she made a deposit for $5400.00. $600.00 in cash and $4800.00 credit card check, (I should have put a hold on the check that day but didn't)

Tuesday ~ She made a deposit for $4000.00 with a cash advance. No checks came through that day.

Wednesday (today)~ two checks came through her account made to credit cards. One for $4200.00. The other is $4000.00 which now puts her in the negative -$4200.00 until she makes another cash advance this afternoon to cover that check also.

There is going to be a point when she is going to max out her credit cards and there will be no more cash advances but the checks she wrote out to the credit card companies are still going to be coming in. That will make her account a negative balance. And we will return them unless they have already cleared her account. The amounts will just keep going up to try to keep her head a float.

Does that make more sense?

Sounds like a kite to me, albeit a different one than I'm used to. My recommendation, hold the next credit card check she deposits for five days, but maybe I'm tougher than most.

I would agree, particularly where you're accepting the credit card convenience checks for deposit, that you could get stuck.

As I see it your options are:

a) place the maximun allowable hold on those checks

b) refuse those checks for deposit from her - although could create a problem if a teller misses the memo and accepts it for deposit, anyway

c) tell her to cease and why... if she doesn't, shut her down

I wasn't thinking either. If she's a repeat overdrafter, you can place an 11 day hold.

To make the matter worst ~ her sister is now getting caught up in the situation also. Doing deposits with credit card checks and transfering money to her sister. Do we put holds on her acct too and possibly shut her down also.

She's definately kiting. If I had to guess, she's at her max on her credit card now. Only she keeps floating the money between the two and both balances are being inflated. Once the kite ends, one of you will be out $4,000.

Remember, one who catches it wins.

And don't be lulled into a sense of security because it's cash being deposited...she's doing something 'not good'. So end it.

There's just been an alarming explosion in the use of those convenience checks on credit cards... I'm sure every bank is seeing way more of them than they'd like.

We, like I'm sure everyone else, have had plenty of them returned because the credit line was tapped out.

What I've also been noticing, which probably goes without saying, is that generally it's the customers who don't have a lot of excess in their checking accounts who are using them, creating the potential for big problems.

We definitely keep an eye on them here. I'm just, still, amazed at how many of them we're seeing on a daily basis!

I believe this is known as a credit card "bust out scheme". When the CC company receives payment they increase the line by the amount of the payment but they are at risk if the check bounces. I actually testified at a criminal trial not too long ago and the guy was convicted and got 20+ years.

Sounds like kiting to me.

Personally I believe we put the maximum hold on every credit card check because we have had so many problems with them. It's that 10% that causes the problems for all the good customers.

Quit worrying about it and when the account has a positive balance - call her and tell her the account is frozen and will be closed - why screw around with holds, her or her sister. Stop the madness.

The balances don't have to be positive...she's just not that good at it is all. I've seen that happen a couple of times.

The bank should really take a look at whether they want to continue to pay the items when they're NSF and not to count on the fact that she's going to deposit cash from a cash advance.

Nip it in the bud and quick.