How Electronic Check Conversion Affects You... and Your Checking Account
June 23, 2010
You might notice some of the checks you've been writing appear on your checking account statement as electronic payments. They might even be listed as ATM withdrawals and automatic bill payments.
What's going on?
The process is called electronic check conversion, and it's becoming the norm in financial transactions. The information on your check--including the check number, account number, payment amount, and your bank's identification number--is used to transfer money out of your account electronically through the Automated Clearing House (ACH), a secure network for processing transactions.
This is nothing new: banks and businesses have been using electronic check conversion for more than five years now. Now it's simply becoming more common, and you're more likely than ever before to see checks appear as electronic payments. Almost 5.7 billion paper checks were converted for electronic payment in 2008, almost 9% more than in 2007, and the number is expected to keep growing, says the National Automated Clearing House Association.
So what does this mean for you? Here are four things to keep in mind:
1. Faster Checking Account Transfer
Don't count on tomorrow's deposit to cover today's payment (what used to be known as "check floating"). Electronic check transfer results in faster payments. Make sure you have enough money in your account to cover the amount of the check before you write it.
2. Notification Required
Businesses must notify you if they use electronic check transfer. Stores must post the information prominently--usually they post a notice at the cash register--and make note of the electronic transfer on your receipt. Some stores also will void the check in front of you and return it immediately with your receipt.
Utilities and other companies that receive payments by mail must include notices about electronic check transfer on or with the bill statement. Businesses must give you other ways to pay, such as credit or debit card or cash, if you don't want them to use electronic check conversion.
3. Tracking Your Checking Account
An electronic check conversion might appear on your checking account statement labelled as normal paper checks or as electronic payments, such as ATM withdrawals or direct bill payments. Don't let that throw you. The name of the business you paid and the check number will still appear for your verification, along with the transaction amount.
4. Catching Checking Account Mistakes
Mistakes are rare, but, as will all things, they do happen. Review your monthly bank statement promptly, or, better yet, get online checking account statements so you can review transactions frequently. If you find an error with an electronic check conversion--such as two payments going through instead of one--then contact your bank right away, just as you would with any other error.
You have 60 days from your statement date to notify the bank, which may take up to 45 days to complete the investigation. If any such investigation takes more than 10 business days, your account must be credited the disputed amount until the error is resolved.
Electronic check conversion makes transaction processing cheaper for most everyone, so it's only going to increase. Learn how it works now to help you prevent and resolve any potential checking account errors.
