A Consumer's Guide to Electronic Payments

Direct Deposit

What is Direct Deposit?

Direct Deposit allows you to have your wages, retirement benefits, and other funds deposited directly into your checking or savings account. Direct Deposit is proven to be safer, more convenient, and more reliable than paper checks.

Direct Deposit is safe. Electronic Payments are never lost or stolen. On the other hand, the Federal Government estimates that more than 4 million paychecks are lost or stolen each year. In addition, FBI studies show that 2,000 fraudulent checks are cashed each day in the United States.

Direct Deposit is the most convenient way to be paid. Whether you are receiving your pay every week, once a month, or once each quarter, your funds will be in your account on the payment date. There is no need for you to spend anxious hours waiting for the check to arrive in the mail or waiting in line to deposit your funds. And most employers will issue a payment stub that is identical to what you receive with a traditional paycheck. It will show how much was deposited into your account and how much was taken out for taxes, insurance and other items.

Direct Deposit is reliable. With Direct Deposit, your money is in your account on the payment date and is available for withdrawal at the opening of business at your financial institution. It does away with the need to worry about your account balance-whether you travel or work long hours. If you travel or work long hour, you have the security of knowing you payment has been deposited in your account.

Amazing Facts About Direct Deposit

  • IRS tax refunds take 14 days using Direct Deposit, half the time of paper returns.
  • In 2000, more than 29 million consumers used Direct Deposit for their tax refunds.
  • More than half of Americans (53 percent) use Direct Deposit for their wages.
  • The chance of having a problem with a check is 20 times greater than with Direct Deposit
  • The satisfaction rate for Direct Deposit is 97 percent.

Direct Deposit helps you manage your finances and gives you peace of mind.

Direct Payment

What is Direct Payment?

Direct Payment is the use of electronic payments authorized by the consumer to pay recurring bills, such as utility bills, insurance premiums, membership dues, and loan repayments. Funds are withdrawn from the consumer's checking or savings account and credited to bill account.

Companies offering Direct Payment must obtain a signed authorization form from the customer. Signing this form permits the company to collect funds for the amount of the bill from the consumer's checking or savings account on a specified date. The customer determines the account from which the payment will be made.

Companies with bills that vary in amount, such as utilities, must send you a monthly statement ten days prior to the date that your account will be debited. For fixed monthly payments, such as mortgage payments or insurance premiums, you should be notified of the payment date and amount prior to the first transaction. The amount will be debited on the same day each month. Because the amount stays the same, you may not receive a monthly billing statement unless there is a change in the date or amount. You are always provided with the details about these payments on the monthly statement from your financial institution. In fact, you receive more information on your statement for electronic payments that you do when writing a check.

Direct Payment saves you time and money. You save time not having to write and mail checks, and you save money buying fewer stamps and checks. You may even save money on late fees and interest charges. No matter how hectic life gets, you know your bills are paid on time.

Amazing Facts about Direct Payment

  • People who don't use Direct Payment spend the equivalent of three days a year writing checks to pay their bills.
  • With postage costs at 46¢ for a first-class stamp, plus the cost of printed checks, consumers who write an average of 15 to 20 checks each month will save between $80 and $100 each year.
  • 36 percent of consumers say they use Direct Payment for at least one recurring payment.

Direct Payment simplifies your life by taking the hassle out of paying your bills.

Types of Direct Payment

  1. Internet-Initiated Payments
  2. Telephone-Initiated Payments
  3. Point-of-Sale/Debit Cards

Internet-Initiated Payments

Internet-Initiated payments are activated by the consumer to make a purchase or pay a bill. Using your customer account and other security information you provide, the company website will verify your identity when you enroll via their website. Companies must follow certain security procedures in order to offer this service, including secure Internet sessions.

Once enrollment is complete, you will log in to your account using a username and password. To make a payment, you will be asked to supply your bank's routing number and account number. To make the system easier to use, most sites will remember your account information under your secure login.

Each time a bill is due, you must return to the company's website to make a payment. Because these payments usually vary from month to month, you will receive a statement to remind you of the amount due. This statement may be delivered via US Mail or by e-mail. Using Internet-Initiated payments allows you to pay your bills from anywhere there is an Internet connection, even if you don't have your checkbook handy.

Telephone-Initiated Payments

Telephone-Initiated Payments allow a company to use the telephone to obtain verbal authorization to debit your checking or savings account. These entries are for one-time debits to pay for goods or services. It is a convenient way to make a payment at the last minute and avoid late fees.

There are restrictions under which companies may debit your account using a telephone authorization. You may call any company and authorize them to debit your account. Companies may only initiate calls if you have purchased goods or services from them within two years of the call or have a written agreement. This means that a company you have never heard of cannot call you and ask for your account information.

Each of the above circumstances requires the company to record your authorization or send you a written notice of your authorization before initiating the debit. The merchant's representative must state clearly the amount of the payment, date of the payment, and your name. The authorization must also include the date of your authorization and a telephone number where you may reach the company if there is a problem.

Point-of-Sale/Debit Cards

Point-of-Sale and Debit Cards allow consumers to pay a merchant electronically when making a purchase using an ATM or Debit Card.

When making a purchase, you present the card to the merchant and authorize the payment by use of a personal identification number (PIN) or signature. The ATM or Debit Card electronically accesses your account and you receive a receipt when the payment is complete.

ATM or Debit cards can also be used to make bill payments at some ATM locations. Where this option is available, the customer selects the bills to be paid from the menu of companies and indicates the amount of the payment. The customer receives a receipt as confirmation of the payment or transaction. The customer's financial institution reports the withdrawal on the customer's monthly account statement, along with information regarding the location where the payment was made.

Point-of-Sale and Debit Cards provide consumers with a substitute to writing checks or paying cash for purchases. These transactions are completed faster than purchases made by check. For many consumers, Point-of-Sale and Debit Cards provide an attractive alternative to carrying large sums of cash to make purchases.

Consumer Tips

  • Never give your checking or savings account information over the phone to a business or individual unless you initiated the call or know and trust the company.
  • Be sure to read all agreements before you sign them and keep a copy of all signed agreements for your records.
  • Authorizations for Direct Payments must be made in writing and must be signed by the customer or authenticated by "digital signature." (Digital signature refers to authorization via computer device using a secure password or code, such as an ATM personal identification number.)
  • For Electronic Check applications, the company must notify you in writing on your bill or post a notice at the checkout counter. An electronic payment is fraudulent if the company has not obtained such authorization.
  • All written authorizations for Direct Payment should be readily identifiable as authorizations to debit your account.
  • Make sure you trust the company you are doing business with before you sign an authorization or provide them your account information.
  • Do not give your PIN number to anyone. Don't write your PIN number on your card or carry it in your wallet or purse. Funds can be stolen from your account by anyone who has your card and your PIN number.
  • If you want to stop making payments by Direct Payment, you should notify the company. Information about how to contact the company should be included on your authorization form. If not, contact the company directly.
  • If your checks or checkbook are lost or stolen, notify your financial institution immediately.
  • When a retailer offers a Point-of-Purchase, make sure that the check you supplied for your account information is returned to you stamped void before you leave the store.
  • Be sure to check your account statement for errors every month. If you notice any transactions that you did not authorize or that are for the incorrect amount, notify your financial institution immediately.
  • Never leave receipts at bank machines, bank counters, trash receptacles, or unattended gasoline pumps.
  • Do not enter account information or initiate payments for a website that is not secure. Most browsers indicate the security of a website by activating an alert message or using the sign of a padlock on the browser window.
  • Remember to review your monthly bills not only for the payment due amount, but also to see if they are using electronic checks to collect funds.

Your Rights and Responsibilities

What you should know about Electronic Payments.

When you take advantage of electronic payments, you have more account protection than by using paper checks. There are rules and regulations that provide the consumer with specific rights and safeguards when using electronic payments. Electronic payments, including electronic checks, are covered by the Federal Reserve's Regulation E. This regulation defines specific consumer rights and protections from error and fraud. There is no comparable Federal regulation covering paper check payments.

How to Protect Yourself

You have the right to a copy of any authorization form you sign to initiate an electronic payment to your account. Authorizations should conspicuously state the amount and date of the payment and the name of the company with which you have made the agreement. You should keep a copy of each authorization for your records.

You have the responsibility to contact the company to cancel authorization. The procedure for canceling your authorization should be explained on your authorization form. If it is not, contact a customer service representative at the company for assistance.

You have the right to be re-credited for debits that you did not authorize. Check your account statement often to verify that all deposits and withdrawals are correct. If you identify an error, contact your financial institution immediately to make a report. You may be asked to sign a written statement to return the unauthorized item.

You have the responsibility to notify your financial institution immediately if you notice an error on your statement. Once you receive your statement, you will have 60 days to report any errors. Your financial institution will investigate the report and follow-up with an appropriate action. See the back of your account statement for more information about what steps to take.