check vs. electronic bill pay

[mek42]

I've read many horror stories here lately about accounts being automatically raided. I do all my bills by electronic bill pay..As I understand this, an instrument equivalent to a bank check is sent, not a personal check with account info. Is this a correct understanding?

If so, would electronic bill pay instead of personal check prevent such instances of blatant theft?

[dcompton]

That seems to be more or less the case when an actual check is sent, as to my apartment complex. At least, as far as I understand it. I've only seen one of them, a couple of years ago, and don't remember much about it, so I may be wrong. But for most of my accounts, it is either electronic, no physical paper at all, or an electronic draft by the company itself -- my electric and phone bills.

[Greebo]

If the payment is initiated from YOUR account, it's fine. If you have a non adversarial relationship with the payee, it's fine.

What you never, ever do is let a creditor have your bank account info so they can do an automatic draft. YOU control the switch, not them. If you ever let THEM pull from your account, they can abuse the privilege, and the country is full of stories where that very thing has happened.

[dcompton]

I admit I do let the electric and phone companies initiate it. In many years, there has never been a problem. That doesn't mean there couldn't be, but I have a long track record with them and don't worry about them suddenly pulling unauthorized money from the account. There is plenty of time to contest a bill before the payment is taken.

[Greebo]

Comcast, Netflix and Audible all auto pull from our account.

We initiate payment to AT&T and BGE - but I'd let them pull too - just never bothered.

I'd never allow a CREDITOR to auto pull.

[Palooka]

I pay Dish and ATT on their website with my debit card and they don't store it. I rather do that than electronic....

[McD]

I've read many horror stories here lately about accounts being automatically raided. I do all my bills by electronic bill pay..As I understand this, an instrument equivalent to a bank check is sent, not a personal check with account info. Is this a correct understanding?

If so, would electronic bill pay instead of personal check prevent such instances of blatant theft?

If you are using your bank's online bill pay, you are fine. When you authorize your bank to send your money to pay your various bills, you are telling them how much monies to pull, when to pull, where to send it. If the bank makes an error, the bank will stand behind it and correct it.

If you allow a credit card company, a cable company, etc. etc. access to automatically pull your payment, you are giving them the authority to basically put their fingers into your account and take your money. If the company messes up and keys in $248.80 to pull instead of the $24.88 you initially authorized, causing you overdrafts, etc. you have to go through the credit card company to get that fixed.

I have seen the situation I have outlined to you when I worked in the banking industry. As a bank, we wouldn't refund any of his overdraft fees because we made no error. It was up to his credit card company to refund him that money and the difference of the payment. They did it--but it took 3 weeks to do so.

Also, when you authorized a bill to be paid automatically there is often a fabulous little default clause in the fine print that no one ever usually reads stating that if you are in default, they will debit your account without warning for the balance owed. I've seen that happen too--a lady had been laid off and was making the choice to buy groceries or pay her cable bill (she had shut the cable off when she was laid off, just couldn't make the final pymt). They debited her account due to default and they could do it because she had agreed to those little terms and conditions. As a bank, we couldn't do anything to help her.

The only place I let automatically debit my account is my water bill. And I work at the water company and I am in charge of processing the direct payments every month, so I feel very confident with that.

As to how the banks actually send your payment--that is dependent on many variables. Typically, your bank sweeps the money from your account into one of their holding acocunts. It is then swept from the holding account to the company you specified's bank IF they accept electronic payments.

If the company you are paying does not accept electronic payments or you maybe have miskeyed an account number, your bank may have to issue a paper check. I would say the vast majority of banks still sweep the money from your account, then issue a paper check to the company. The majority of banks I have experience with handles paper checks in this manner. I did work for a bank that would issue a check from your account.

However, even if the bank does issue a paper check from your account, that does NOT give the company access to auto-debit your account without your prior knowledge, consent, etc. All it does is give them a starting place if they want to try to obtain garnishment ior a levy on your account.

Does that make sense?

[Russ]

Very informative post Nichole. Thank you.