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By Ralph Bovitz, CPA, PFS
In the
ongoing effort to save money, some merchants are beginning to “cash” your
check by electronically charging your checking account for your payment,
instead of processing your check the traditional way, through the nationwide
check-clearing system.
Here’s how it works:
You mail
your check to your merchant or service provider – telephone company, credit
card company or neighborhood plumber, for example. The merchant uses the
Routing Number on your check (a unique number assigned to your bank) and
your personal checking account number, also on your check, to charge your
check-payment to your bank account, electronically.
What happens to your check?
The
vendor or merchant retains it and should destroy the check. If you want a
copy of the check, you can call the merchant or your bank.
The Problem
The check
amount shows up in the electronic activity section of your bank statement
and not with the numerical list of other checks paid that month. If you do
not fully reconcile your bank statement and don’t notice the unexpected
electronic charge, there is a possibility that you could be charged for the
same check twice.
Here’s
what happened recently in the case of one of my clients. A local home
repair service electronically charged my client for nearly $400, the amount
of the check she sent for the repair. A couple of months later, the check
that was the basis for the electronic charge was presented to the bank by
the merchant and was cashed by the bank.
Although
we arranged to recover the duplicate payment, a nearly $400 bank charge, it
is clear that without a complete and timely bank reconciliation, significant
money would have been lost.
What if you don’t want the
merchant to electronically charge your account?
You have
to call the merchant and request the practice be stopped. Your bank cannot
end the practice and the merchant need not get your permission to
electronically charge your bank account for your check payment.
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