This collection of personal financial information is directed to works for a
living. Everyone needs to know more about financial matters. The SOURCE
for much of this information is the GSA Consumer Information Catalog published
by the Federal Citizen Information Center.
many consumers, electronic banking means 24-hour access to cash through an
automated teller machine (ATM) or Direct Deposit of paychecks into checking or
savings accounts. But electronic banking now involves many different types of
Electronic banking, also known as electronic fund
transfer (EFT), uses computer and electronic technology as a substitute for
checks and other paper transactions. EFTs are initiated through devices like
cards or codes that let you, or those you authorize, access your account. Many
financial institutions use ATM or debit cards and Personal Identification
Numbers (PINs) for this purpose. Some use other forms of debit cards such as
those that require, at the most, your signature or a scan. The federal
Electronic Fund Transfer Act (EFT Act) covers some electronic consumer
Electronic Fund Transfers
EFT offers several services that consumers may
Automated Teller Machines or 24-hour
Tellers are electronic terminals that let you bank almost any time. To
withdraw cash, make deposits, or transfer funds between accounts, you
generally insert an ATM card and enter your PIN. Some financial institutions
and ATM owners charge a fee, particularly to consumers who don't have
accounts with them or on transactions at remote locations. Generally, ATMs
must tell you they charge a fee and its amount on or at the terminal screen
before you complete the transaction. Check the rules of your institution and
ATMs you use to find out when or whether a fee is charged.
Direct Deposit lets you authorize
specific deposits, such as paychecks and Social Security checks, to your
account on a regular basis. You also may pre-authorize direct withdrawals so
that recurring bills, such as insurance premiums, mortgages, and utility
bills, are paid automatically.
Pay-by-Phone Systems let you call
your financial institution with instructions to pay certain bills or to
transfer funds between accounts. You must have an agreement with the
institution to make such transfers.
Personal Computer Banking lets you
handle many banking transactions via your personal computer. For instance,
you may use your computer to view your account balance, request transfers
between accounts, and pay bills electronically.
Point-of-Sale Transfers let you pay
for purchases with a debit card, which also may be your ATM card. The
process is similar to using a credit card, with some important exceptions.
While the process is fast and easy, a debit card purchase transfers money -
fairly quickly - from your bank account to the store's account. So it's
important that you have funds in your account to cover your purchase. This
means you need to keep accurate records of the dates and amounts of your
debit card purchases and ATM withdrawals in addition to any checks you
write. Your liability for unauthorized use, and your rights for error
resolution, may differ with a debit card.
Electronic Check Conversion
converts a paper check into an electronic payment at the point of sale or
elsewhere, such as when a company receives your check in the mail. In a
store, when you give your check to a store cashier, the check is processed
through an electronic system that captures your banking information and the
amount of the check. Once the check is processed, you're asked to sign a
receipt authorizing the merchant to present the check to your bank
electronically and deposit the funds into the merchant's account. You get a
receipt of the electronic transaction for your records. When your check has
been processed and returned to you by the merchant, it should be voided or
marked by the merchant so that it can't be used again. In the mail-in
situation, you should still receive advance notice from a company that
expects to process your check electronically.
Be especially careful in telephone transactions,
which also could involve e-checks. A legitimate merchant should explain the
process and answer any questions you may have. The merchant also should ask for
your permission to debit your account for the item you're purchasing or paying
on. However, because telephone e-checks don't occur face-to-face, you should be
cautious with whom you reveal your bank or checking account information. Don't
give this information to sellers with whom you have no prior experience or with
whom you have not initiated the call, or to sellers who seem reluctant to
discuss the process with you.
Not all electronic fund transfers are covered by
the EFT Act. For example, some financial institutions and merchants issue cards
with cash value stored electronically on the card itself. Examples include
prepaid telephone cards, mass transit passes, and some gift cards. These
"stored-value" cards, as well as transactions using them, may not be
covered by the EFT Act. This means you may not be covered for the loss or misuse
of the card. Ask your financial institution or merchant about any protections
offered for these cards.
To understand your legal rights and
responsibilities regarding your EFT account, read the documents you receive from
the financial institution that issued your "access device." That is, a
card, code or other means of accessing your account to initiate electronic fund
transfers. Although the means varies by institution, it often involves a card
and/or a PIN. No one should know your PIN except you and select employees of the
Before you contract for EFT services or make your
first electronic transfer, the institution must tell you the following
information in a form you can keep.
A summary of your liability for unauthorized
The telephone number and address of the person
to be notified if you think an unauthorized transfer has been or may be
made, a statement of the institution's "business days" (which is,
generally, the days the institution is open to the public for normal
business), and the number of days you have to report suspected unauthorized
The type of transfers you can make, fees for
transfers, and any limits on the frequency and dollar amount of transfers.
A summary of your right to receive
documentation of transfers, to stop payment on a pre-authorized transfer,
and the procedures to follow to stop payment.
A notice describing the procedures you must
follow to report an error on a receipt for an EFT or your periodic
statement, to request more information about a transfer listed on your
statement, and how long you have to make your report.
A summary of the institution's liability to
you if it fails to make or stop certain transactions.
Circumstances under which the institution will
disclose information to third parties concerning your account.
A notice that you may be charged a fee by ATMs
where you don't have an account.
In addition to these disclosures, you will
receive two other types of information for most transactions: terminal receipts
and periodic statements. Separate rules apply to passbook accounts from which
pre-authorized transfers are drawn. The best source of information about those
rules is your contract with the financial institution for that account. You're
entitled to a terminal receipt each time you initiate an electronic transfer,
whether you use an ATM or make a point-of-sale electronic transfer. The receipt
must show the amount and date of the transfer, and its type, such as "from
savings to checking." When you make a point-of-sale transfer, you'll
probably get your terminal receipt from the salesperson.
You won't get a terminal receipt for regularly
occurring electronic payments that you've pre-authorized, like insurance
premiums, mortgages, or utility bills. Instead, these transfers will appear on
your periodic statement. If the pre-authorized payments vary, however, you
should receive a notice of the amount that will be debited at least 10 days
before the debit takes place.
You're also entitled to a
periodic statement for each statement cycle in which an electronic transfer is
made. The statement must show the amount of
any transfer, the date it was credited or debited to your account, the type of
transfer and type of account(s) to or from which funds were transferred, and the
address and telephone number for inquiries. You're entitled to a quarterly
statement whether or not electronic transfers were made.
Keep and compare your EFT receipts with your
periodic statements the same way you compare your credit card receipts with your
monthly credit card statement. This will help you make the best use of your
rights under federal law to dispute errors and avoid liability for unauthorized
You have 60 days from the date a periodic
statement containing a problem or error was sent to you to notify your financial
institution. The best way to protect yourself if an error occurs - including
erroneous charges or withdrawals from an account, or for a lost or stolen ATM or
debit card - is to notify the financial institution by certified letter, return
receipt requested, so you can prove that the institution received your letter.
Keep a copy of the letter for your records.
If you fail to notify the
institution of the error within 60 days, you may have little recourse. Under
federal law, the institution has no obligation to conduct an investigation if
you've missed the 60-day deadline.
Once you've notified the financial institution
about an error on your statement, it has 10 business days to investigate. The
institution must tell you the results of its investigation within three business
days after completing it and must correct an error within one business day after
determining that the error has occurred. If the institution needs more time, it
may take up to 45 days, in most situations, to complete the investigation - but
only if the money in dispute is returned to your account and you're notified
promptly of the credit. At the end of the investigation, if no error has been
found, the institution may take the money back if it sends you a written
An error also may occur in connection with a
point-of-sale purchase with a debit card. For example, an oil company might give
you a debit card that lets you pay for gas purchases directly from your bank
account. Or you may have a debit card that can be used for various types of
retail purchases. These purchases will appear on your periodic statement from
the bank. In case of an error on your account, however, you should contact the
card issuer (for example, an oil company or a bank) at the address or phone
number provided by the company. Once you've notified the company about the
error, it has 10 business days to investigate and tell you the results. In this
situation, it may take up to 90 days to complete an investigation. If no error
is found at the end of the investigation, the institution may take back the
money if it sends you a written explanation.
Lost or Stolen ATM or Debit
If your credit card is lost or stolen,
you can't lose more than $50. If someone uses your ATM or debit card
without your permission, you can lose much more.
If you report an ATM or debit card missing to the
card issuer before it's used without your permission, you can't be held
responsible for any unauthorized withdrawals.
If unauthorized use occurs before you report it,
the amount you can be held responsible for depends upon how quickly you report
the loss to the card issuer.
If you report the loss within two business
days after you realize your card is missing, you won't be responsible for
more than $50 for unauthorized use.
If you fail to report the loss within two
business days after you realize the card is missing, but do report its loss
within 60 days after your statement is mailed to you, you could lose as much
as $500 because of an unauthorized transfer.
If you fail to report an unauthorized transfer
within 60 days after your statement is mailed to you, you risk unlimited
loss. That means you could lose all the money in your account and the unused
portion of your maximum line of credit established for overdrafts.
If you failed to notify the institution within
the time periods allowed because of an extenuating circumstance, such as lengthy
travel or illness, the issuer must reasonably extend the notification period. In
addition, if state law or your contract imposes lower liability limits, those
lower limits apply instead of the limits in the federal EFT Act.
Once you report the loss or theft of your ATM or
debit card, you're no longer responsible for additional unauthorized transfers
occurring after that time. Because these unauthorized transfers may appear on
your statements, however, you should carefully review each statement you receive
after you've reported the loss or theft. If the statement shows transfers that
you did not make or that you need more information about, contact the
institution immediately, using the special procedures provided for reporting
When you use an electronic fund transfer, the EFT
Act does not give you the right to stop payment. If your purchase is defective
or your order is not delivered, it's as if you paid cash. That is, it's up to
you to resolve the problem with the seller and get your money back.
There is one situation, however, when you can
stop payment. If you've arranged for regular payments out of your account to
third parties, such as insurance companies, you can stop payment if you notify
your institution at least three business days before the scheduled transfer. The
notice may be oral or written, but the institution may require a written
follow-up within 14 days of the oral notice. If you fail to provide the written
follow-up, the institution's responsibility to stop payment ends.
Although federal law provides only limited rights
to stop payment, individual financial institutions may offer more rights or
state laws may require them. If this feature is important to you, you may want
to shop around to be sure you're getting the best "stop-payment" terms
The EFT Act protects your right of choice in two
specific situations regarding use of electronic fund transfers: First, the Act
prohibits financial institutions from requiring you to repay a loan by
electronic transfer. Second, if you're required to receive your salary or
government benefit check by EFT, you have the right to choose your institution.
If you decide to use EFT, keep these tips in mind:
Take care of your ATM or debit card. Know
where it is at all times; if you lose it, report it as soon as possible.
Choose a PIN for your ATM or debit card that's
different from your address, telephone number, Social Security number, or
birthdate. This will make it more difficult for a thief to use your card.
Keep and compare your receipts for all types
of EFT transactions with your periodic statements. That way, you can find
errors or unauthorized transfers and report them.
Make sure you know and trust a merchant before
you share any bank account information or pre-authorize debits to your
account. Be aware that some merchants use electronic processing of your
check if you sign a receipt authorizing the transaction.
Where to File Complaints
If you think a financial institution or company
has failed to fulfill its responsibilities to you under the EFT Act, speak up.
In addition, you may wish to complain to the federal agency listed below that
has enforcement jurisdiction over that company.
State Member Banks of the
Federal Reserve System
Consumer and Community Affairs
Board of Governors of the Federal Reserve System
20th & C Streets, NW, Mail Stop 801
Washington, DC 20551
Office of the Comptroller of the Currency
Mail Stop 7-5
Washington, DC 20219
Federal Credit Unions
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314
Non-Member Federally Insured
Office of Consumer Programs
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Federally Insured Savings and
Loans, and Federally Chartered State Banks
Consumer Affairs Program
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
Other Credit and Debit or ATM
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop
and avoid them. To file a complaint
or to get free
information on consumer issues, visit www.ftc.gov
or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY:
1-866-653-4261. The FTC enters Internet, telemarketing, identity theft
and other fraud-related complaints into Consumer
Sentinel, a secure, online database available to hundreds of civil
and criminal law enforcement agencies in the U.S. and abroad.
How do overdrafts and bounced checks happen?
write a check,
from an ATM,
use your debit
card to make a purchase, or
automatic bill payment or other electronic payment
for more than the amount in your
checking account, you overdraw your account. Your bank (or your
savings and loan or credit union) has the choice to either pay the
amount or not. If it pays even though you donít have the money in your
account, you may be charged an "overdraft" fee. If your bank
returns your check without paying it, you may be charged a
"bounced-check," or "nonsufficient funds," fee. And
the person or company that you wrote the check to--for example, a store,
your landlord, or the phone company--may charge you a
"returned-check" fee in addition to the fee your bank
How can you avoid overdraft and
The best way to avoid overdraft and bounced-check
fees is to manage your account so you donít overdraw it.
track of how much money you have in your checking account by keeping
your account register up-to-date. Record all checks when you
write them and other transactions when you make them. And donít forget
to subtract any fees.
special attention to your electronic transactions. Record your
ATM withdrawals and fees, debit card purchases, and online payments.
forget about automatic bill payments you may have set up for utilities,
insurance, or loan payments.
Keep an eye on your account balance. Remember that some checks
and automatic payments may not have cleared yet.
your account statements each month. Between statements, you can
find out which payments have cleared and check your balance by calling
your bank or by checking online or at an ATM. Be sure to find out the
actual amount in your account--your account balance not including any
funds available to you through "courtesy
overdraft-protection," or "bounce coverage," plans.
Sometimes mistakes happen. If you do overdraw your
account, deposit money into the account as soon as possible to cover the
overdraft amount plus any fees and daily charges from your bank.
Depositing money into your account can help you avoid additional
overdrafts and fees.
What are "courtesy
overdraft-protection," or "bounce coverage," plans?
Many banks (as well as savings and loans and credit
unions) offer "courtesy overdraft-protection," or "bounce
coverage," plans so that your checks do not bounce and your ATM and
debit card transactions go through. With these plans, youíll still pay
an overdraft fee or a bounce coverage fee to the bank for each item. But
you will avoid the merchantís returned-check fee and will stay in good
standing with the people you do business with.
How much do courtesy
overdraft-protection, or bounce coverage, plans cost?
Plans vary, but most banks charge a flat fee (often
$20 to $30) for each item they cover. And many set a dollar limit
on the total amount your account may be overdrawn at any one time. For
example, the bank might cover overdrafts up to a total of $300, including
all the fees. In addition, some banks charge a daily fee--say $5 a
day--for every day your account is overdrawn.
Example: Suppose you forgot
that you had only $15 in your account and wrote a check for $25, used an
ATM to get $40 cash, and used your debit card to buy $30 worth of
groceries. In these 3 transactions youíve spent a total of $95--and
overdrawn your account by $80 ($95 - $15 = $80). How much will your
forgetfulness cost you?
If you have a courtesy overdraft-protection plan, your
bank may decide to cover all 3 transactions. And each of the 3
overdrafts will trigger a fee. You will owe your bank the $80 that you
spent even though it wasnít in your account, plus the 3
overdraft fees. If your overdraft fee is $25 per overdraft, you will owe
your bank $155: $80 + $75 (3 x $25).
What are some other ways to
Banks, savings and loans, and credit unions may
provide other ways of covering overdrafts that may be less expensive.
Ask your bank about these options before making your choice. You may be
your checking account to a savings account you have with the bank.
If you overdraw your checking account, the bank can transfer funds from
your savings account to your checking account. Ask your bank about
up an overdraft line of credit with the bank. You need to apply
for a "line of credit" just as you would apply for a regular
loan. If you overdraw your account, the bank will lend you the funds by
using your line of credit to cover the overdraft. You will pay interest
on this loan, and there may be an annual fee. But the overall costs may
be less than the costs for courtesy overdraft-protection plans.
your account to a credit card you have with the bank. If you link
your account to a credit card, any overdraft amount becomes a cash
advance on your credit card. You will probably be charged a cash-advance
fee, and interest charges on the advance will start immediately. The
cost of this option depends on the interest rate on your credit card and
how long you take to pay back the advance.
The choice is yours. Consider these ways to cover your
Ways to cover your overdrafts
Example of possible cost for each
Good account management
Link to savings account
$5 transfer fee
Overdraft line of credit
$15 annual fee + 12% APR
Link to cash advance on credit card
$3 cash-advance fee + 18% APR
Courtesy overdraft-protection plan
$20 to $30
$40 to $60 ($20 to $30 bank fee +
$20 to $30 merchant fee)
* These costs are only examples.
Ask your bank, savings and loan, or credit union about its fees. Return
What do you need to know
about courtesy overdraft-protection, or bounce coverage, plans?
using these plans as short-term loans--they are costly forms of
you overdraw your account, get money back into your account as soon as
possible. Remember that you need to put enough money back into your
account to cover both the amount of your overdraft and any bank
if you have one of these plans, there is no guarantee that your bank
will cover your checks, ATM withdrawals, and debit card and other
electronic transactions that overdraw your account.
account management is the lowest-cost way to protect your hard-earned
money. If you need overdraft protection every now and then, ask your
bank about the choices and services that are right for you.
What should you do if you have
a problem or complaint about courtesy overdraft-protection, or bounce
If you have a complaint, first try to resolve the
problem directly with your bank, savings and loan, or credit union. If
you are unable to resolve the problem, you may want to file a complaint
with one of the state or federal agencies responsible for enforcing
consumer banking laws.
For more information, contact the federal
agency responsible for regulating your financial institution.
law, known as Check 21, makes it easier for banks to electronically
transfer check images instead of physically transfer paper checks. This
guide explains your rights under Check 21 as they relate to
substitute checks. Substitute checks are special paper copies of the
front and back of your original checks that are created to replace the
How does Check 21 affect you?
Because of Check 21 and other check-system improvements, your
checks may be processed faster--which means money may be deducted from
your checking account faster. Before you write a check, make sure that
your checking account has enough money in it to cover the check.
You may be one of the majority of consumers who do not receive their
canceled checks with their account statements. Instead, you may receive
"pictures" (known as digital images) of your checks, a list of
your paid checks, or a combination of these items. Check 21 will have
little or no effect on these practices.
On the other hand, if you do get your canceled checks back in your
regular account statements, you may notice some changes under Check 21.
For example, your bank may start sending you a combination of original
checks and substitute checks in your account statements. You may use a
canceled substitute check as proof of payment just as you would use a
canceled original check.
The account agreement you have with your bank governs whether you
receive canceled checks with your account statements. If you currently get
canceled checks back with your statements, you will continue to receive
your checks unless your bank notifies you that it is changing your account
You may receive substitute checks in other limited circumstances. For
example, your bank may give you a substitute check if you ask to have a
particular canceled check back to prove a payment. Also, your bank might
provide a substitute check to you when returning a "bounced"
check that you deposited into your account.
By law, your bank may not pay a check from your account unless you
authorized that payment. In other words, you are protected from having
your bank pay the same check from your account more than once or from
having your bank pay the wrong amount for a check. Check 21 does not
change these protections. However, Check 21 does give you special
rights if you receive a substitute check from your bank. This guide
explains your rights regarding substitute checks. For your rights in other
situations, contact your bank.
What is a substitute check?
A substitute check is a special paper copy of the front and back of an
original check. The substitute check may be slightly larger than the
original check. Substitute checks are specially formatted so they can be
processed as if they were original checks. The front of a substitute check
should state: "This is a legal copy of your check. You can use it the
same way you would use the original check." The following sample
shows what a substitute check looks like.
Front of a substitute check
Back of a substitute check
Not all copies of a check are substitute checks. For example, pictures
of multiple checks printed on a page (also known as an image statement)
that is returned to you with your monthly statement are not substitute
checks. Online check images and photocopies of original checks are not
substitute checks either. You can use image statements and other copies of
checks to verify that your bank has paid a check.
Why do banks create substitute checks?
Some banks find that exchanging electronic images of checks with other
banks is faster and more efficient than physically transporting paper
checks. In certain circumstances, however, banks may need to use a paper
check. To address this need, Check 21 allows a bank to create and
send a substitute check that is made from an electronic image of the
Can I require my bank to return my original check?
No. In general, the law does not require your bank to return your
original check. Many banks destroy original paper checks. Other banks may
store original checks for some period of time and then destroy them. Check 21
ensures that you have the same legal protections when you receive a
substitute check from your bank as you do when you receive an original
What should I do if I receive a substitute
check and there is a problem?
Check 21 provides a special process that allows you to claim a
refund (also known as an expedited recredit) when you receive a substitute
check from a bank and you think there is an error because of the
substitute check. For example, you may think that you were charged twice
for the same check.
You may use the special process to get a refund of the money you lost.
The amount of your refund under the special process is limited to the
amount of your loss or the amount of the substitute check that you
received, whichever is less, plus interest on that amount if your account
earns interest. If your loss is more than the amount of the substitute
check, you may have the right under other laws to recover additional
amounts of money.
If your bank finds that your claim is valid, you should receive your
refund by the next business day after the bank's finding. Unless your bank
finds that your claim is not valid, you should receive up to $2,500 of
your refund (plus interest if your account earns interest) within 10
business days after your bank receives your claim. You should receive the
rest of your refund (plus interest if your account earns interest) no
later than 45 days after your bank receives your claim. If your bank finds
that your claim is not valid, it will send you a notice explaining why.
Your bank may reverse the refund (including any interest on the refund)
if it can show that the substitute check did not cause an error in your
How do I file a claim under the special refund
procedure for substitute checks?
If you notice a problem with a substitute check, you should contact
your bank as soon as possible. In general, to use the special refund
procedure for substitute checks, you should contact your bank no later
than 40 days from the date your bank provided the substitute check or from
the date of the statement that shows the problem.
In general, you must
why you think the charge to your account is incorrect.
why you believe the original check or a better version of the substitute
check is needed to determine whether the substitute check should have
been deducted from your account.
how much money you lost because of the substitute check. (Include any
fees you were charged as a result of the substitute check. Also, alert
your bank to any interest you lost, if your account earns interest.)
copy of the substitute check, or give your bank information that will
help it identify the substitute check and investigate your claim.
What if I have more questions about substitute
Contact your bank.
Visit the online information on Check 21.
Contact your state's consumer protection agency or attorney general's
office for information on state laws that apply to checks and substitute
Remember . . .
bank uses substitute checks, your checks may be processed faster. Be
sure you have enough money in your account to cover the checks that you
review your account statement to make sure the charges are correct.
receive something other than a substitute check, be aware of your rights
to resolve errors under other state and federal laws.
your bank right away if you notice an error in your account.
For additional information see
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