I'm going to delve a bit into the Ticker from yesterday in which I advised people to get the hell away from Citibank (NYSE: C) based on a report that an "accidental" mailing of terms changes to all 50 states allegedly only applied in Texas.

Some rooting around on The Internet (along with a little help) disclosed this little gem:

Texas-only my ass.

Note that the date on that file is 12/28/2009 (by the name) with an effective date of January 1st, 2010, and there is nothing that indicates it is not the case everywhere.

Here's the issue.

Most checking accounts - that is, non-interest-bearing accounts against which one can write checks - are better known as "DDA" accounts in banking parlance.  If you look back through your counter receipts for deposits into one (assuming you keep them) you will probably see the letters "DDA" on the detail line.

What is "DDA"?  It stands for DEMAND DEPOSIT ACCOUNT.

What is a "Demand" account?

It is an account which the holder reserves the right to, and the bank agrees to comply with, demand any and all good collected funds in the account at any time up to the entire balance.

Now most banks will not allow you to walk in and demand $50,000 in cash at any instant, mostly because they don't have it, or if they do have it allowing that would severely deplete their cash amount on hand and they would not be able to transact routine amounts for other people.  After all, it takes time (even if only a few hours) to order up an armored truck full of $100s and $20s.

But "withdraw" is not limited to cash.

You can get a counter (bank) check for the entire balance, you can write a check on your account (and give it to someone or deposit it somewhere else) and you can wire or ACH money in or out of the account.  All are "withdrawals."

"NOW" (negotiable order of withdrawal) accounts are a different sort of animal.  Those pay interest, and on those accounts the bank reserves the right (and always has) to require notice.  Same with saving-linked sweeps (which, by the way, is what Alan Greenspan wildly expanded the authorization for early in his tenure as Fed Chairman, essentially destroying bank reserve requirements as this was instantaneously gamed to reduce actual held reserves almost to zero.)

What this "quiet" little change means is that Citibank has changed the character of all of its checking accounts.  They no longer offer a "DDA" account, whether they did before or not.

The importance of this cannot be overstated.  Without a "DDA" account the bank could at its sole discretion dishonor any check at any time, thereby hitting you with an overdraft fee as you didn't give them the requisite seven days notice.  It could also prevent you from removing your funds to a more appropriate (for you) institution for that seven days, entirely at their whim and sole discretion.

ALL time deposits (savings accounts included, which have always contained this requirement) effectively are a loan of funds from you to the bank.  That is, you don't "deposit" money there, you loan it to the bank which then charges other people to borrow it.  This relationship isn't taught in our Goebbels Government Education System (not even in college!) but it is nonetheless true.

However, essentially all banks have maintained one type of account - a Demand Deposit Account - which in fact operates differently.  A DDA account is an appointment of the bank as a custodian of your funds, not as a borrower of your funds.  Said account never pays interest (per Federal Reserve rules - and common sense) yet it allows immediate, unrestricted access to your funds because you are not lending them to the bank, you are appointing them as a custodian of them.

DDA accounts are essential for the ordinary flow of commerce.  There must be an option available to consumers and businesses alike in which they can place custody of funds they may need, up to the entire balance of that account, at any point in time without prior notice.  Without this ability you are literally at the mercy of the financial institution in question, which can cause you to incur hideous "bounced check" and other similar charges as well as potentially exposing you to criminal liability for "uttering" (writing bad checks.)

This is NOT a trivial change in terms.  I would never do business with an institution for my business or personal checking accounts that did not offer a true demand account, and you should not either.  This sort of change is outrageously destructive to your rights as the funds you have on deposit in a checking account are not intended to be loaned to the bank to do with as they wish, but rather to be held for your immediate (if necessary or desired) use.

If you have a lick of sense you cannot hold such an account after this change.  If you do, and get burned as a consequence at some point in the future, do not cry that you were not warned - you were, and it's your own fault that you failed to heed that warning.

GET YOUR MONEY OUT OF CITIBANK AND INTO AN INSTITUTION SUCH A CREDIT UNION NOW.  THERE IS NO EXCUSE FOR THIS SORT OF ABUSIVE CHANGE IN TERMS THAT COULD EASILY EXPOSE YOU TO FINANCIAL OR EVEN CRIMINAL LIABILITY.