I am interested in learning about the process through which Debit
Cards, Banks and Merchants operate. Is there a known error in the
transaction flow, that causes users to make purchases with debit cards
that have no cash?

In a few months, I have racked up bills in excess of $200 in Non
Sufficient Fees (NSF) as a result of using a debit card to make
purchases when the card had no cash available. I was surprised to
learn this is possible - despite not having cash to cover
transactions, my bank allowed my debit card purchases to go through,
essentially allowing payment on an item when I don't have the money to
cover for it (acting like a credit-card). However, everytime this
happened, the bank charged me a Non Sufficient Fee of $30.

I am of the opinion that my bank should not let me make debit card
purchases if I do not have the cash, however for some "technical"
reason; I suppose this happens all the time.

I am in the process of writing a formal complaint to the bank
requesting my NSF fees re-paid, since a debit card should only allow
me to make purchases on items that do not exceed the value on the
card.

I am especially interested in learning about the possiblity of this
technical problem being as a result of something called 'posting
transactions' apparently it is possible for me to buy an item today,
that will not post into my account for a few days. Effectively setting
up a situation where I can overspend, with money that I think I have
(since the posting has not been effected).

What is the probability that such an "oversight" is an intentional
bug, that allows people to spend cash, when they don't really have
none, so the bank can make cash form charging Non Sufficient Fees?

If you use your Debit Card in a store, for example, those transactions
are not processed immediately but are batched together and (typically)
processed during the night.

It is inevitable that most transactions will hit your account at some
later time but it is your responsibility to make sure that the funds
or a facility is in place.

If not, then the bank is going to hit you with penalties.

There are two types of Debit card transactions, Debit and Credit.
Usually, one is asked at the time of payment if the transaction is
"Debit or credit?" If the transaction is Debit, the customer must
enter a PIN number, and the money is deducted immediately from the
account. If the transaction is Credit, the customer is required to
sign a receipt, and the transaction is processed as if it were a
credit card purchase and is is not immediately deducted from the
account. Thus, in the latter instance, purchases can accumulate before
being processed, resulting in  an overdraft. Here is the explanation
from one issuer:

SECU Debit Card FAQs
http://www.secu.org/faqs/debitcardfaq.htm

"What does it mean when I use my Debit Card and the clerk asks "debit or credit?"
    There are two types of Debit Card transactions: debit (PIN) and
credit (signature). When paying for a purchase, the clerk will ask
"debit or credit?" When you reply "debit" to the clerk, it becomes a
PIN transaction. You are required to enter your Personal
Identification Number (PIN) after the card has been swiped through a
point of sale terminal. With PIN transactions, funds are withdrawn
from your Checking Account immediately at the time of the transaction.
When you reply "credit" to the clerk, it becomes a signature
transaction. Signature transactions do not require your PIN but you do
sign a slip to accept the transaction. With signature transactions,
funds are held in your Checking Account at the time of purchase until
the transactions post to your account in one to three days."


Here are the recommendations of the state of New York (USA) regarding
overdrafts on debit cards:


Best Practices for Issuers of Debit Cards 
http://www.banking.state.ny.us/il011220.htm

"Debit card "overdraft"

If an account is overdrawn, it is not reasonable for a bank to honor
the debit card transaction while at the same time assessing a fee for
the "overdraft", without prior notice of the fee to the consumer.
Whether or not the customer has an overdraft feature on the underlying
checking account, any "overdraft" feature on the debit card should be
optional, and the terms thereof should be clearly and conspicuously
spelled out in the customer agreement. At the time a deposit account
is opened, or by a subsequent mailing offering this feature, customers
should be given a clear choice to either accept or decline. Finally,
for those accepting an "overdraft" feature, fees should be
reasonable."

hlabadie-ga

You should tell your location and the name of the bank as details vary
a little from bank to bank and with the locaction. The date you
started your debit card may also help as you may be under old rules
rather than new ones.
 I think you are correct, most banks look for ways to collect more
penelties, however if they value your accout, they may make a partial
refund of the penilties they have charged to your account. A
believable excuse may be helpful. There is a slight chance they will
cancel your debit card if you make serious waves. Typically banks
expect you to keep a close check on your balance. My wife up dates our
balance several times per week via the computerized teller we reach by
telephone. I believe this can also be done by computer with most banks
in Florida, USA   Neil

Interesting Comment, hlabadie ...

Evidently, practices (like spelling!) vary in different places:

Here in the UK, we presently only use PINs at the ATMS, although moves
are afoot to introduce them at point-of-sale.

In France, they've used Smart Cards for ages with PINS but without
signatures throughout.

PB

hlabadie-ga

The link you provided http://www.banking.state.ny.us/il011220.htm
refers to situations like mine and possibly many other people who have
been affected. My bank has never made it clear to me (something I have
verified with them several times) that they allow me to make debit
card purchases when I do not have the balance to cover and then charge
me for the "convenience"

I hope by referring them to this link it will help. 

I am very grateful for the response.

Everyone else,

I am of the opinion that unless the bank makes it clear (in writing,
through a policy pamphlet) that they offer you the convenience of
making overdrafts at a fee with debit card purchases - they should not
charge you the overdraft fee.

Glad to have been helpful. There is always the option of moving your
account to another bank that does disclose its policies in clear
language. Good luck.

hlabadie-ga