I think it might be more accurate to say it’s as easy to do here as anywhere else, but the banks don’t process the payments as quickly as they could. IIRC Chase had a commercial a few years ago where this couple are on vacation and they need to get a payment out to somebody stat. The bank comes to the rescue with its “premium” super-fast payment system, for which the customer undoubtedly has to pay an extra charge. When I was using online bill pay, there was always a lead time of several days, even when the payment was obviously going to a huge utility or corporation which had probably been receiving electronic transfers since the 1960s, and wire transfers before that.
As for stale-dated checks, as they’re called, I don’t think the ordinary consumer has any protection against this problem other than not using personal checks. I suspect that in many cases your check may not actually be looked at by any human being, either at the recipient company or at the bank, so you can’t protect yourself by writing “Void after 14 days” on the face of it.
The problem is that the USA has thousand of tiny banks. In Canada, for example, there are 5 real banks providing the vast majority of consumer and business banking services. When they decide “this is how it will be done”, then everyone does it that way. If you want t pay a business bigger than a mom&pop store, odds are they bank with one of the big 5 so they can be made part of the online billing system easily. The credit unions and caisses jump on the band wagon as soon as they can. Consequently, things like debit machines, online banking, ATM’s, online bill paying, etc. - and now chip cards - are lightyears ahead of the USA, where hundreds of banks have to agree and figure out how to consolidate their information.
In the USA, the company you want to pay online may bank with one of hundreds of banks, and if their bank is not part of the group… This is where printing a cheque and mailing it from one bank to another makes a lot more sense.
Not to hijack the thread, but I keep hearing about this miraculous electronic transfer stuff that happens in Europe every time checks come up and I have a hard time understanding how it works.
I mean, you need to provide various pieces of information with your payment. These are typically written on the check or are already pre-printed on a separate stub that is mailed with the check in the US. Do european banks let you provide arbitrary information when you login to transfer the funds? Do you need to type it all in manually? What if you make a typo – will they return the money to you when they don’t find a matching account? What is the exact process – you get an e-bill that includes some companies account #, and you login to your bank, create a new wire transfer to that account, and then fill in your account #/name/choices/etc. into some “Extra information” field?
Really? You haven’t paid bills online?
Businesses sign up with the bank(s) to accept electronic payment. When I want to add a new payee, I go to my bank website and “Add payee”, and search for them. Then I need my customer or account number with that business, which is printed on their bill sent to me. (Usually 9 to 14 digits). I enter that for the payee and double-check it. Now I can select that payee any time going forward (i.e. each month), and indicate the amount and if I want to pay now or at a later date. Presto. I get a confirmation code that I typically write on the bill for future reference.
This works in Canada because businesses have to sign up with maybe 5 banks country-wide. Not sure if the banks pool this list, meaning only 1 sign-up…
Actually, it doesn’t even need to be done online - I did normal transfer starting in the 90s with my first bank account, and it was established procedure then.
The paper way goes: A company sends you either a bill with a transfer form (Überweisungsträger) filled in, and you just add:
your own account number, bank id. nr. (BLZ), date and sign it, then throw it in the bin in the bank.
Or your landlord writes you a letter: "the monthly rent is xxxx Euros, please transfer till the 5th day of each month to account nr. 12345 at Dresdner Bank, BLZ 123456789, regarding (=your own customer nr, the bill nr. etc.) 123XY.
(Landlords, water companies etc also ofter power of withdrawal (Einzugsermächtigung) You send them a letter allowing them once or until you recall to withdraw amounts from your account. Some companies are respectable enough and it’s less hassle for you; others, like Telekom, had the habit of making outrageous bills and taking the money, then playing deaf when customers contested the bills. So the advice was “pay Telekom bills individually, and don’t pay contested bills”.)
If you do telephone banking, you log on, and read off the information from the bill:
name of receiving company
account nr. dito
BLZ (Bank id) dito (IBAN if intl.)
amount (and currency if necessary)
Regarding: customer nr., bill nr, any other information that helps you later figure out why you transfered money (two lines; usually your name and adress will automically be added by the bank as info)
If you do online banking, it’s similar: by logging on, you identify which account and which bank the money is taken from, and you just tell the bank where the money needs to go and why.
As for checking up: the banks are supposed to verify that the account name fits the number. Often, they don’t do. If somebody has power of withdrawal, you can demand the money back for 3 weeks if something went wrong. But if you transfer it yourself and transpose numbers - well, should’ve paid attention. Banks often demand a fee for getting the money back, sometimes it’s done on the “let’s be nice” basis, sometimes the money is gone for good.
However, since usually you have the form from the receiver in front of you with all information (or their letter), this happens rarely.
Regular automatic withdrawal is something different than “online bill payment”. As mentioned, you give authorization; usually a voided cheque and a signed form. The company can then use that to withdraw from your account, for example a regular payment for rent, or cable TV, or phone. AFAIK, it is a regular payment, always the same amount in the situations I know of - not a different amount each month. Your cheque has all the information necessary to identify an account and bank branch. (You could give them the info instead, but a voided cheque guarantees no typo in the numbers). Presumably a company authorized to initiate the transfers has a reliable enough credit rating that they won’t start pulling money out multiple random acounts. Or. you initiate it yourself out of your acount.
I have, but I can’t imagine how this model can be extended to apply to all the things that I usually write checks for. There must be literally tens of millions of different payees in the US, and you would expect each bank to maintain an active update database of these? How would you even look them up? How would I differentiate Bill Smith that rents me my house from all the other Bill Smiths that rent houses to other people in the area?
How is that in any way better or easier than a check? A check lets me take a piece of paper that is pre-printed with my bank account #, bank ID that I just fill in with the amount and sign it and have the mailman pick up from my mailbox the next day… How often do you go to your bank?
Because the Bill Smith who is your landlord is the one with the account nr. 123456 at the Third Fifth bank in your state?
How do you know, when you write a check to Bill Smith, that the right Bill Smith (your landlord) cashes it, and not some other Bill Smith?
I said that which way I choose - paper in bin, telephone or online - depends on what’s convenient for me, which depends on the circumstance. Right now, my closest bank branch is right by my mensa, where I eat lunch (that’s why I choose it) and I go there regularly to get my account statements from the printer (by printing them myself I save postage).
When I lived on a farm in the middle of nowhere for a year, I did everything by telephone banking.
The advantage of dropping the transfer form in the bin instead of writing a check is that the bank does the transfer in at most 3 to 5 work days, and only to that account. It’s faster for me to pay and for the receiver to get his money. Whereas a check needs to be fully cleared takes 3 to 5 weeks before you know it’s good. With transfer, the receiver looks at his statement and the money is there.
Authorisation to withdrawal works with changing amounts here.
If I have a regular payment of the same amount, I can tell my bank “transfer 50 Euros every month to my saving account” (Dauerauftrag), but this is another thing again, because I start and stop them.
However, if those regular automatic withdrawals are possible in the US, wouldn’t that be a solution for the OP?
I don’t think that’s the real problem. The problem is lack of federal regulation which means each state has different regulations, allowing the banks freedoms to make their own complicated rules; and lack of consumer protection.
For example, banks in Germany liked to credit payments received one or two days later, while debiting payments made immediatly. Mostly so they could speculate with that money, but also in some cases incurring an overdraw interest when the account should have been covered.
So people went to court, it went all the way up to the BGH (Federal High Court), who scolded the banks and said “treat the customers fairly, everything happens on the same day, not allowed, nasty banks!”. The excesses have now stopped. They still try it occasionally, but savy customers know they can take them to court.
So if better consumer protection laws existed in the OPs case, or federal regulations overrode all those conflicting laws, the customers would have a better case, too.
No, your own bank, the Second Bank, doesn’t have a database of all Bill Smiths. Why should they? All the bank needs is a list of bank IDs. You tell them “Bill Smith, account nr. 12345, Bank ID 987665432” Your bank looks at the Bank ID and says “Ah, that’s Third and Fifth bank”, tells Third and Fifth bank “payment for your account nr. 12345, a Bill Smith” and Third and Fifth looks in their customer database. If account nr. and name matches, they credit the account; if it doesn’t, they query back your bank.
It’s one available method(where constanze live),though not one I’m familiar with, there is obviously a lot of variation between countries/banks. By the time I was old enough to regularly pay bills internet banking was available, so personally I’ve never really used anything other than that. My parents (still) use some preprinted form where they fill in the recipient’s(there is room for several recipients) account number, a reference number(found on the bill) and the amount, which they then send by mail to the bank. So instead of sending a piece of paper to everyone they owe money, they send one to the bank.
But the real beauty of this is that it is all the same to the recipients, whatever method I use is between me and my bank, I will use the method that is the most convenient for me and the company who sent the bill won’t know or care how I did it.
Like I said, lots of variation between countries/banks, so most of what I say only apply to Sweden and my particular bank’s online service.
This might be a lot of detail, but you asked for the exact process. 
If we take a good old fashioned paper bill, at the end of it there will be a stub that contain all the information needed to pay it: An account number,the company name, usually there will be a reference number, the amount you owe and a due date. (The account number, reference number and amount owed is machine readable in case you want to pay the bill using cash at the bank/post office, though no sane person does so voluntarily anymore, as the price of this service is absurd these days.)
When I’ve logged on to my bank(using a security token) and gone to the giro transfer page I can select, from a drop down list, from which of my accounts the money should be taken. If it is the first time I’m making a payment to this company I will have to add their account to a list of approved recipients, I enter the account number and the system will retrieve the company name, if it’s the correct company I can add it to the list(again I need the security token).
Once I’ve done this I can just select that account from a drop down list, so I will never have to enter that account number manually again. There is a field for amount to pay(duh) and one for the transfer date, if I enter a date the recipient will have the money in their account on that date, if I leave it blank the transfer will happen the same day or the next business day. There is also a field where I can enter either the reference number mentioned earlier or some other message that will allow the recipient to identify the source of the payment. And finally there is a field where I can enter a note(or just leave it blank) that will appear on my own account statements.
Once I’ve entered all the necessary information I can click a button that will add this transfer to a list of transfers awaiting approval, when I’ve added all the bills I want to the list I can approve it using my security token and all the transfers will happen on the dates I specified.
The process for transfers to personal accounts is similar, but with very important difference that the system will not retrieve the name of the account holder, so you have to be really careful when you add new recipients.
On the subject of e-bills, a company’s first bill will always be on paper(or some electronic format containing the same information), but if they offer e-bills, when I pay the first bill I will be given the option to sign up for e-bills with them, if I do any subsequent bills from them will be sent directly to my internet bank and all I have to do to pay after I log in is select which of my accounts I want to use, then add the bill to the list of transfers awaiting approval and approve.
AFAIK, except for rent, we can set up automatic bill payments for just about any sort of typical monthly obligation we might have. It doesn’t matter if it’s a fixed regular amount, or if it varies from month to month. However, a lot of people hesitate to do this because it’s particularly with variable amounts that they like to control when the account goes out. Many workers at U.S. companies are paid weekly, so it often happens that you need to wait for the next paycheck before you pay off that unusually large mobile phone bill.
People accept that most employees don’t have enough buffer in their account to cover a large bill, but are living from weekly paycheck to weekly paycheck? Nobody thinks that there is a serious imbalance between wage and expenses if this is normal for middle class? Wow. A middle class wage here is expected to afford a buffer of 2-3 net months pay for emergiencies. Only poor workers live paycheck to paycheck (or people with bad money management skills).
Is this because of lack of employee rights and lack of conracts, so that workers can be fired immediately? Because it sounds weird to me that companies waste money that way instead of paying monthly or at least bi-weekly.
Way back in the 50s, workers were paid in cash at the end of week (Friday = Payday), while white-collare employees were paid bi-weekly. But then in the 60s or 70s the banks approached the companies and said “Hey guys, if you transfer the wage directly into the accounts, you can save yourself a lot of trouble with the cash (security, counting it out in each pay bag, changing, lots of robberies…). Sure, we get a lot of new customers that way, but you have a company account for business transactions anyway, and we will offer the workers free accounts for starters to sweeten the deal. What do you say?” And the companies said “Sounds great!” After everybody had to get an account, banks slowly introduced fees for the work of handling the accounts. And landlords and power companies and everybody else demanded transfer instead of cash, too, because it was far less work to get money transferred directly into your account than to walk around every week collecting the rent, or having to pay one guy to count pennies and shlep them to the bank every week after people paid their bills.
In the 80s already, the only people without accounts were those on the lowest rungs - homeless, people with permit problems, bad credits and so on whom most banks denied accounts. This meant that for each payment, they had to go to the Sparkasse or post bank and pay not only the amount for the transfer, but a fee - up to 20 Marks - to handle the cash. Power companies and others first offered a bonus if you paid by transfer instead of cash, and later that developed into a fee for paying cash.
It’s really weird that the US still has a different system.
It does happen that way sometimes. But even for those who don’t live so precariously, keeping more money in a bank account than you expect to need for bills and day-to-day expenses isn’t the most attractive option. Not many people are falling over each other in the rush to put thousands of dollars of their money into bank accounts that pay 2% interest or less. And however carefully you plan, you can’t foresee every possible contingency.
The employer does lose a smidgin of interest that it would otherwise keep, but I’d be surprised if it costs that much more for the checks and electronic transfers to be run weekly. OTOH changing the schedule does incur significant costs.
The general rule is to have 2 to 3 net (monthly) wages in your checking (or daily savings) account for unforeseen events: washing machine or car going bust. Or saving up 50 Dollars each month for the yearly vacation/ new car/ new couch. That’s the short-term investment. Everything else goes into middle- and long-term investment.
I wasn’t thinking of the interest the employer might earn, but of the hassle and time for the HR dept. to calculate the wages each week instead of once a month.
Each time you do the calculation, there’s a base time you need anyway. Calculating a whole month once is therefore usually quicker than calculating one week four times. Plus the expense for printing and delivering the checks. True, the cost for cashing the checks is borne by the workers, but even then, there are four times as many movements on the account as in a monthly payment. And don’t banks charge per movement once you’ve passed the free minimum?
I meant to mention something about this earlier. IME it’s been the bigger companies I have worked for which paid out weekly. This makes some sense, since they tend to have automated payroll systems, often supplied with data automatically by the timecard system. Particularly if nearly everyone is on salary (not entitled to overtime pay), then it’s the same pay, week after week, until you get a raise or get promoted. Payroll automation being one of the very first things to which business applied computer technology in the 1950s, it’s fairly easy.
True, even with automatic deposit they still have to mail or distribute pay statements, and that has a cost. But possibly with mere statements some of the security measures can be dispensed with.
I’ve never heard of banks charging customers for excessive automatic deposits. My understanding is that they strongly encourage the practice.