Changes in the economic landscape of our time cause us to need to do something as soon as possible about debt. The wonder of automatic payments for certain expenses can be very helpful in controlling spending. As difficult as this can be to adjust to, automatic payments for the mortgage and some (not necessarily all) utilities can be helpful in keeping one on track about how much money is really in the bank. Also, a separate account from bills are paid can be helpful in giving a sense of the actual money needed to pay off certain bills. The separate account also helps give the accountholder more of a sense of security about not getting confused as to where the money went.
There are a few issues that can occur with automatic payments, however. An event that I’ll call the “train wreck” for lack of a better term occurs when the timing of deposits goes out of synch with withdrawals. When a paper check bounces (yes, that is what we are talking about), there is a certain amount of time that used to occur between the time the person paying found out about the insufficiency of funds in their account. However in today’s digital e-ecommerce based world, a payment that comes from an account that has insufficient funds is flagged almost immediately. You probably don’t have to guess what the sequence of events is next. But I’ll review them for you. First, the payment is presented to the paying institution for action. Next, the institution (your bank) checks your balance. Let me pause here. When there was such a thing as the “neighborhood” bank, you might actually receive a phone call asking about the discrepancy. As I am aware, the only thing similar to this is the provision for another account preselected by you to cover an overage. But continuing on with the steps to the “train wreck”, the bank (your bank) having checked the balance and noting that no other account is available to cover the payment request rejects payment and then punishes you (your account) by charging your for not having the money to cover the transaction. Your account now has two problems, a rejected payment and an unplanned bank charge. The requesting bank (your creditor) represents the request for payment, usually without checking with you. This has been known to actually occur a number of times before the hapless payor is notified regarding the problem. At this point, I strongly recommend knowing your accounts and the conditions under which a “train wreck” is possible. The amount of stress that you will avoid with respect to such an event is well worth the painstaking detail that maybe necessary in tracing this process with your bank.
