e-checking  

Welcome to the home of e checking

With the Internet, you can now shop and compare local bank services and credit offers with those from financial institutions around the nation. The Internet provides up-to-date interest rate reports on mortgages, auto loans, credit cards, home equity loans, savings and other banking products. Get online rates for banks, credit cards, investment brokers, insurance, mortgages, real estate brokers in the U.S. and Canada.

When choosing a checking or savings account, you will want to consider the rate of interest the account will earn. You will also look for a checking account that has a low or no minimum balance requirement that you can easily compile with.

To compare checking accounts, request a list of fees that are charged on each type of account offered at that bank. Some institutions will drop or lower checking fees if you have paychecks directly deposited by your employer. Direct deposit offers the additional advantages of convenience, security, and immediate access to your money.

Bank failures are rare these days, but they still happen. If your financial institution fails, you may not be covered if you have more than $100,000 in any one bank. Look for a sign at your bank that says your money is protected by the FDIC (The Federal Deposit Insurance Corporation). The FDIC provides information in print and on www.fdic.gov that will help you determine whether your money is protected. Credit union accounts have similar protection from the NCUA (The National Credit Union Association).

Under Federal law you could lose all the money in your bank account and the unused portion of your line of credit established for overdrafts if you fail to report an unauthorized transfer or withdrawal within 60-days after your bank statement is mailed to you.

Checking Accounts and Debit Cards

You can save more than $100/yearly in fees by selecting a free checking account or one with no minimum balance requirement. Request a complete list of fees that are charged on these accounts, including ATM and debit card fees. See if you can get free or lower cost checking through direct deposit or agreeing to ATM only use. Be aware of charges for using an ATM not associated with your financial institution.

Key Laws Governing Checking Accounts

Below are some common consumer concerns and a look at upcoming changes that may affect you.

Funds availability: One way depository institutions protect themselves against losses from bad checks is to put a "hold" on certain deposits. The Expedited Funds Availability Act of 1987 sets the maximum time periods that financial institutions may hold funds deposited by check before making the money available for withdrawal. Also, the new Check Clearing for the 21st Century Act (called Check 21), which becomes effective on October 28, 2004, will speed up the check clearing process

Erroneous or fraudulent payments: In general, most of the protections against improper payments are covered by state laws, which can vary significantly. Typically, a bank is liable to its customer if it charges its customer's account for a check that is not "properly payable," although state laws also generally require customers to review monthly account statements and report any unauthorized transactions promptly. The new federal Check 21 law, which authorizes banks to pay based on a substitute check instead of an original check, includes provisions for "expedited re crediting" in cases of improper payment. And the Electronic Fund Transfer Act, which governs consumer rights and responsibilities for debit cards, also puts a premium on prompt notification of an unauthorized transfer using your card. Important: If you wait longer than 60 days after the date the bank mails the statement containing the debit card error, you could be liable for the full balance in your account plus any overdraft line of credit.

If you need proof of a payment: Your original cancelled check or substitute check with endorsements provides proof of payment, although images of checks are also accepted often. Under Check 21, your bank may provide you a substitute check that is the legal equivalent of the original check

Merchants Now Process Checks Electronically

Many stores will accept your check at the sales counter, scan it through a reader, hand the voided check back to you and then use the information from your check to arrange for an electronic fund transfer. A similar process may occur when you mail a check to pay a bill.

Electronic Checking Payments

Today's consumers believe that e-checking is cheaper, easier and faster than writing and mailing paper checks. Americans have relied on paper checks as a primary payment method for generations. Yet the latest research from the Federal Reserve System indicates that consumers increasingly are tapping their checking accounts electronically instead of through paper checks. Merchants Now Process Checks Electronically

After rising for many years, the number of checks paid by financial institutions in the U.S. declined from 49.5 billion in 1995 to 42.5 billion in 2000, according to a 2002 study published by the Fed. In contrast, the number of electronic payments (such as automatic bill paying and Internet banking) and debit card payments combined surged from 18.9 billion to 42.8 billion during the same five years.

While fewer checks are being written in the U.S., the number is still very large. Among the reasons Americans still like paper checks: They're familiar and reliable.

"Consumers generally understand how cash, credit cards, and checks work because we can visually see the process and have control," says Robert Lee, a technology specialist in the FDIC's Division of Supervision and Consumer Protection.

Some people also want to have "something tangible to prove you paid for a purchase or to show the IRS agent," Lee adds.

But electronic payments are growing dramatically as more consumers conclude that transacting business electronically is cheaper, easier and faster than writing and mailing paper checks.

To Learn More About Your Checking Accounts or Making Payments
Example: "Once online bill payment is set up with your bank," Lee says, "you only need to go online, select the vendor to be paid, choose a due date, key in the amount, and click the pay button."

Other popular electronic alternatives include direct payment programs in which you authorize your bank to automatically pay bills, such as your mortgage or health club dues and telephone banking which enables you to pay bills any time using a touch-tone phone.

Checks and Balances: New Rules, New Strategies for
Bank Customers in the 21st Century

Changes are coming that will make it more important than ever to actively manage your checking account to avoid costly mistakes. This is not your father's checking account.

How often do you visit or have some contact with your bank? Chances are you'd say it's only once in a while and certainly not every day. But if you think about it, you probably do have dealings with your bank almost every day through your checking account.

Consider how often you write checks, make deposits (including direct deposits), use your ATM or debit card or make automated payments from your checking account, and you'll be reminded about how much you depend on these services from your bank. According to the Federal Reserve System, Americans write about 40 billion checks a year. In addition, electronic payments from checking accounts – using a debit card (to deduct payments directly from your bank account), online banking (to pay bills, move money or conduct other transactions using your computer) or other automated services – already outnumber paper checks as a payment of choice (see Electronic Payments Surge: How and Why).

And while consumers access their checking accounts all the time, we know from the many phone calls and letters we receive that people often have questions or concerns about their checking accounts, including how to resolve errors, avoid bouncing checks, keep fees low and protect against fraud.

Especially important: More changes will be coming as a result of "Check 21," short for the Check Clearing for the 21st Century Act. This law, which takes effect on October 28, 2004, will allow financial institutions to process "substitute checks," high-quality paper reproductions of both sides of original checks. Each substitute check will be created from an electronic image of an original paper check. Over time, Check 21 will make check processing faster, and that has real implications for check writers and check depositors. Example: If you currently get your original cancelled checks back with your monthly statement, in the future you may get substitute checks instead.

Given these changes, FDIC Consumer News offers the following tips and information about what to look for and also what to look out for when choosing and using a checking account.

1. It's more important than ever to avoid bouncing checks. A check deposited in a bank generally travels by airplane and truck until it reaches the paying bank, typically about one or two days later. As a result of Check 21, more checks will be processed electronically ... and faster. That means you need to have enough money in your account when you write a check or run the risk of having checks bounce.

While it's always our advice to have enough money in your account before you write a check, we realize that some people don't always do that – they'll write a check on the 28th of the month expecting their paycheck to be deposited on the 30th of the month, just in time to cover that check. "But if the checks clear sooner as a result of Check 21," says William Henley, Jr., an FDIC electronic banking specialist, "there is a greater risk that a check will bounce if sufficient funds are not in your account when the check is written."

As a result of Check 21, more checks will be processed electronically... and faster. That means you need to have enough money in your account when you write a check or run the risk of having checks bounce.
And a bounced check can be costly, with fees typically in the range of $15 to $30 per check.

What can you do to avoid bounced checks? Janet Kincaid, FDIC Senior Consumer Affairs Officer, says the first step is to keep your checkbook up to date. Be sure to deduct ATM withdrawals, bank fees and debit card purchases. Compare your checkbook with your monthly statement. Do not rely on your ATM receipt for balance information because it may not reflect outstanding checks or debit card transactions.

"If this is a joint account, make sure you know the dollar amount of each check, ATM withdrawal or debit card transaction that the other person is making, so you don't overdraw the account inadvertently," Kincaid says. "It's hard enough keeping track of things when one person is using the account."

Also, carefully consider the pros and cons of signing up for an overdraft line of credit, which means the bank will automatically cover checks you write (up to an agreed amount) even if you don't have enough funds in the account. You also should be aware that some banks, at their discretion and usually for a fee, may pay overdrafts under certain conditions even if the customer hasn't signed up for a particular program.

These and other overdraft services – and their costs – can vary significantly from bank to bank. "It's really important to remember that this service is essentially a loan so there can be interest charges or other fees," says Kincaid. Also, if you do not pay the overdraft and the bank closes the account, you most likely will have difficulty opening a bank account elsewhere.

The potential for faster check processing as a result of Check 21 has other implications for check writers. One is that you may have less time to place a "stop payment" on a check you've written.

2. Expect to get substitute checks from your bank as proof of payment instead of original cancelled checks. For many years, banking institutions have "truncated" checks for some customers. This means the institutions do not return cancelled checks in monthly statements. Instead, they keep original checks for a short period and send statements showing images of cancelled checks. Or, some banks only list check transactions on monthly statements and don't routinely send cancelled checks or images. Now, Check 21 is expected to reduce the instances in which original checks are returned with statements. Here's what's happening:

As before, if you write a check to someone who is not an account holder at your bank, your original check will be deposited at another institution. The check then travels to your bank for payment. But when Check 21 takes effect, the bank where the check is deposited will have two choices. Option one is to return the original check to your bank, as was done in the past. The second option, under Check 21, will be to create an electronic image of the check, produce a substitute check and send it to your bank. This second option means your original cancelled check is no longer available to you.

"Before Check 21, it was your bank that decided whether to return all your original cancelled checks with your statement," says Henley. "Soon your bank may not have the option of returning all your original cancelled checks, even if it wants to."

What if you must prove a disputed payment and your bank has given you a substitute cancelled check, not your original cancelled check? As long as the substitute check meets Check 21's standards, legally it would serve as proof of payment. And what if a bank's substitute check falls short of those standards? FDIC attorney Michelle Borzillo says that "Check 21 provides warranties and remedies to protect parties to the transaction."

Note: Banks have been providing images of checks for decades to millions of customers who do not receive original checks. These images often are accepted as proof of payment by the IRS, courts and other parties provided they meet certain requirements.

3. Protect against check fraud, which is getting increasingly sophisticated. Bank security procedures cannot stop all frauds, which may involve printing or altering checks or obtaining account numbers used to arrange for "payments" from accounts. You can help by promptly reviewing your bank statement each month and immediately reporting any unauthorized transactions. Or, better yet, monitor your account more regularly online or through telephone banking programs at your bank. Timely notification of a problem can limit your potential liability (see Key Laws Governing Checking Accounts), stop a fraud or assist in an investigation.

Key Laws that Govern Checking Accounts

Make sure to protect your account information. For example, only give your checking account number, including the routing numbers at the bottom of your check, to businesses you know are reputable. Never provide checking or credit card information, Social Security numbers or other personal information in response to an unsolicited call or e-mail, which could be fraudulent. For more information about Internet "phishing" scams in which thieves use fake Web sites and e-mails to mislead consumers into divulging valuable personal information.

Be wary of offers to send money – perhaps to buy something you're selling or forward lottery winnings you've supposedly won – and you're asked to accept a cashier's check for more than the amount due and wire the "excess" money back. The cashier's check often will be counterfeit and you will be responsible for the money you wired to the con artist.

Take safety precautions with your checks, too. Don't carry more checks than you expect to use, keep extra checks in a secure place, and contact your bank immediately if any of your checks are lost or stolen.

And consider direct deposit of your paycheck and other checks you may receive, such as Social Security payments, as a way to prevent them from being lost, misplaced or stolen out of mailboxes. "Direct deposit isn't just safer than handling and mailing paper checks – it's also faster," says Kincaid. "In addition, some banks will reduce their checking account fees if you use direct deposit."

4. Periodically ask yourself, and your bank, if you're getting the best deal. If you think all checking accounts are pretty much alike, you'd better think again.

Your bank probably has several types of checking accounts with different features, fees, yields, minimum amounts to open an account, and other characteristics tailored to certain kinds of customers. And different banks offer different checking products. Checking accounts from the bank down the street or even on the Internet may be more to your liking.

How can you take advantage of this freedom of choice? "First sit down and evaluate your needs, perhaps with the help of a customer service representative at your bank," says Kincaid. Ask yourself: How many checks do I write each month? Do I plan to pay most of my bills without checks, perhaps by phone or over the Internet? Do I use an ATM or a debit card regularly? How much of a balance do I plan to routinely keep in the account?

Perform this kind of review every year or two. Perhaps you'll discover that your existing checking account is still right for you or that switching to a different account (at your bank or elsewhere) could save you money or bring you a better value.