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Online checking not snafu-free

By Marcie Geffner · Bankrate.com
Friday, September 10, 2010
Posted: 4 pm ET

Online banking can be wonderful: It's fast. It's easy. There's little or no paper to pile or file. And there's no need to drive or walk to a bank branch.

But, as Constance Gustke reports in "Are online checking accounts for you?" on Bankrate.com, online banking also has some drawbacks, which can include "deposit delays, impersonal customer service and limited checking options," to quote the story.

One drawback not mentioned is technology glitches, those ubiquitous online equivalents of dead-end streets. You can't go forward, you can't veer right or left, you can't quite turn around, and you certainly can't get to your destination.

Here's an example: Being self-employed, I'm required to make quarterly estimated income tax payments to the U.S. government and the state of California. Those payments are supposed to be sent in with, you guessed it, a form that helps to ensure my payments are credited to my Social Security number.

Unfortunately, the online bank where I have an account offers no way to send a form, or indeed, any kind of paperwork with a check. The only option is to send the payment through the online banking feature and then send the form separately. That might work, but I don't entirely trust the tax authorities to credit my payments properly without their little form.

But wait, you say. Why not use the online banking service to send the check to myself, and then pop the check and the form together into the mail?

That sounds like a workable solution, except for the fact that the online banking function automatically uses the payee on the check as the addressee on the envelope. The U.S. Postal Service is far from perfect, but I have to hope they wouldn't deliver a check made out to the U.S. Treasury to my home, even if my house number, street, city and ZIP code were correct.

That's not a total indictment of online banking. Rather, it's just to point out that there are some bugs in these systems that can be problematic or just annoying.

Whether that outweighs the other benefits, I haven't decided. What do you think?

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10 Comments
Marcie Geffner
September 28, 2010 at 9:54 pm

Excellent info. One point that's clear here is that all the various means by which banking can be accomplished can be used to great advantage by those who set up systems that work for their needs. Good job, folks! And thanks for sharing your systems.

Debra James
September 27, 2010 at 4:46 pm

I probably spend about 2 hours per month reviewing my bank, credit card, and utility statements for my household. Our banking use is pretty basic, and we don't perform a lot of withdrawals. Our pay checks are deposited into our savings account, and we scheduled transfers to coincide with the times bill payments are due. We keep a few hundred dollars in checking, but the rest is in savings. This is how we do our banking:

- We use credit cards for most purchases and to pay my utilities; pay them off every month. I check our accounts online to verify charges and credits/debits about once per week. I use the bank's online bill pay or automatic payment service for my recurring household bills, and that generates about 12 transactions per month; credit cards, mortgage, home owner's and life insurance policies, a few payments made on behalf of my mother, and one utility that doesn't accept CCs.

- We keep a 2-3 hundred dollars cash at home to use for pocket money, and rarely go to the ATM to make small withdrawals. We use the debit card for purchases about 1-2 times per month (usually, for when I've bought more groceries at the farmer's market than I have cash to pay), and that saves me from having to reconcile the checking account with these types of transactions. As I stated, we use credit cards for most large purchases, so it takes us a 4-5 months before we need to replenish the house "piggy bank".

Jack
September 27, 2010 at 3:47 pm

Marcie,

That is my point. "In the old days" we spent our time balancing the check book and yelling at our spouse why they didn't log something. Now, we probably spend that same time reconciling the transactions in arrears while most things are on auto pay. The time is spent not on paying the bills but on organizing the transactions. We haven't saved time, but our tracking abilities are MUCH better. I can run all kinds of reports to show my families financial trajectory. In the end, that is the most important thing. I care more that my net worth and savings goals are on track. I don't want to spend time and energy making sure Verizon is paid. Pay and move on.

Marcie Geffner
September 24, 2010 at 6:33 pm

With so many options for bill payments, automatic deposits and account management, we really can keep track of our finances, as Jack notes, "down to pretty much every penny." That's good and it raises raises another question: How much time do we all spend in a typical month on our to-the-penny bookkeeping?

Marcie Geffner
September 21, 2010 at 8:46 pm

Property tax bills are certainly another excellent example of this particular limitation of online banking. Any transaction that requires paperwork to be properly credited is perhaps best done with a paper check or an online payment system, though hopefully not one with the onerous fees that Debra encountered.

Jack
September 21, 2010 at 7:35 pm

My other piece of advice with people and banks is go for a non-interest bearing checking account and sweep to/from online savings accounts that pay more. Interest rates are too low to deal with paying fees to a bank to get interest on a checking account. Most of the time people lose on this. I am charged nothing from my bank because I have one direct deposit set up. They have great online bill pay (aka, a lot of electronic vendors) and an ATM on every corner so if I have to deposit I am not spending money on gas driving around. When big bills need to be paid I sweep from my online savings account and that takes 2 business days at the most. Also, if you need a check book there are tons of online printers that can print checks cheaper than your bank. (Just get the numbers correct from your bank.)

I know it sounds like a lot of work but I save time elsewhere by having most of my bills auto deduct from my credit card. Then, to pay the credit card, I do a sweep monthly. The bills that won’t auto deduct on the credit card auto deduct from my checking account or I have on recurring bill pay. I have structured the dates to conform with my pay periods so I don’t have to worry about not having enough money in the accounts. I only pay the mortgage and credit card manually to ensure there is enough in the checking account. These two payments are also through electronic bill pay.

I also rarely have cash and pay with my debit or credit card to monitor my budget down to pretty much every penny.

Jack
September 21, 2010 at 6:56 pm

You should pay your CA estimates on FTB's website. No extra fee and you get a confirm that it was paid. There is also no need for a form. I only use bill pay with physical checks for my gardener. With my bank, almost EVERY vendor has an electronic interface for bill pay. Obviously, it is a problem when you pay individuals who don’t have a paypal account…aka, my gardener. If the vendor is not on your banks electronic bill pay list, the vendor itself usually has an option to pay them directly from their site. I don't want ANYTHING going through USPS unless I have to. It defeats some of the purpose of bill pay.

Alternatively, if you are married and file jointly, have your husband withhold more from his pay to cover your estimates. Ideally, if he is W-2, withhold all of it at the end of the year.

As far as a register, you can set Quicken up to download automatically for you. I personally don't have problems balancing my checkbook in arrears after bills are paid. If you monitor your account more frequently, which you should anyway, you shouldn’t be worried about bouncing anything.

Debra James
September 15, 2010 at 12:53 pm

I encounter a similar problem as Constance twice a year when I have to pay my property tax. I don't trust my county to properly apply my taxes with just the check alone. I'd use the county's online payment system, but I don't want to pay their fees of $3 to use an e-check, or a 2.5% service fee for using credit cards. Constance probably doesn't use the tax agencies's online payment systems for similar reasons. I my case, I have to pull out the ol' paper checkbook to make these types of payments.

I don't think that banks want to take on the extra responsibility of forwarding your payment forms with your checks. This may be a service available in the future, but I think it will be relatively expensive, and probably more cost effective to just use an e-check at the payee's website.

Marcie Geffner
September 14, 2010 at 8:05 pm

An excellent point, Kay. (Thanks!) There are some online services that will pull all the transactions from your accounts and combine and organize them to help you track your spending, but I've to find one that's not cumbersome and time-consuming to use or that accomplishes the basic function you've described. Maybe there is a mobile phone app?

Kay Bell
September 11, 2010 at 7:35 pm

I am a big fan of online banking and bill paying. My biggest problem with the system, though, is that I too often forget to note the transactions in my check register. Yes, I still use that paper document to keep track of my balance and reconcile my monthly electronically received bank account statements. I'm stunned that banks (or at least my bank, which is one of the big ones)haven't yet come up with, or partnered with a company that can create, an online check register system so when I make a payment online, it automatically goes to that program and keeps me up to date on my balance. Yes, I know that's available when the payment is made, but I like to do the math when the payment decision is made.