Ways money flies out of your checking account
|By Laura Bruce
The handling and transportation of paper checks is expensive and can be disrupted by weather and other events. On Sept. 11, 2001, the processing of checks that relied on air transportation ground to a halt following the terrorist attacks.
Electronic payments have been around for decades,
but it's only fairly recently that the Federal Reserve has championed
a much more pronounced push toward the electronic conversion of
checks. For consumers this may mean that money is coming out of
their accounts considerably faster than they may have expected.
Combine that with automated teller machine and credit
and debit card transactions and it can be difficult to keep track
of how much money is available. That can lead to overdrafts, especially
for those who live paycheck to paycheck.
Here are the primary ways money comes out of your checking account.
Paper check -- The usage
of checks is declining, but checks still account for approximately
$40 trillion in payments annually, excluding checks that are converted
to electronic transactions, according to the Federal Reserve. The
typical check travels around the country by common land or air carriers
until it arrives at your bank where it is either stored or returned
Check conversion -- Send a check by mail or use a check for payment in a store and it may be converted to an electronic payment. Information is taken from your check and a one-time debit is made from your account. When done at a store, the check is swiped through a machine, voided and handed back to you. The electronic debit to your account is called a point-of-purchase transaction. When you mail a check and it's converted electronically, an image is made and the original check is destroyed. The electronic debit from your account is an ARC, accounts receivable conversion.
Direct payment -- This
is used for recurring bills such as mortgage payments, loans, and
cable or utility bills. It's also used for routine payments into
a savings account. You set it up once and payments are deducted
automatically. The arrangement stays in effect until you terminate
the authority to deduct payments from your account. You may see
this on your statement as an ACH payment.
Debit card -- Debit cards
are rapidly increasing in popularity. They are making the greatest
gains when it comes to the number of transactions -- from 8.3 billion
in 2000 to 15.6 billion in 2003.* By comparison, payments by
credit card grew at the slowest rate over the same period. Debit
cards can be used to access an ATM network by entering a personal
identification number, or PIN, or they can be used at the cash register
(point of sale).
ATM -- Cash withdrawals
and money transfers between accounts.
Changes may be coming to checking. For more information,
look for check-hold times to be reduced soon."