Question for the Bankers: Bill Pay Paper Checks

[gooddecisions]

When a bank sends a paper bill pay check, why do they take the funds out of your account on the send/delivery date rather than when the payee cashes/deposits the check?

This has been my one and only complaint about online bill pay. I don't want to go back to mailing my own checks, but cringe at the thought of not really knowing if the payee actually received my check. Wells Fargo takes the funds out on the send date and the send date is 5 days before the so-called "payment date", but you never really know if the sender got it unless you get hit with a late fee- and that could create more problems- meanwhile that money is long gone from your account.

[ontrack]

I think this might be specific to your bank. I use paper bill pay checks to pay my rent, and the money doesn't leave my account until my landlord cashes the check, usually 2-5 days after the due date. I can also see the signature/stamp on the back of the check image. This is with Bank of America.

[Abby Normal]

Not a banker- but... Most banks will take it out of your account the day you request the payment. So if I say I want the check paid on the 16th, it will be deducted out of my account that day. Regardless of when the recipient deposits the check. I've only had one instance where the recipient claimed they did not receive the check. I called my bank, they gave me the information I needed. The company had received it, but posted it to the wrong account. It's really no different than you writing the check yourself.

[gooddecisions]

But it is different because if I wrote the check myself, it would clear my account on the day the payee presents it for deposit or to be cashed. I know action can be taken if you hear from the payee that they never got the check, but otherwise it's a mystery. And if you sent it to an individual who never cashed it, then I guess it's free money for the bank because it's not in your account and it's not in their account.

I'm sure there is a good reason for this and I would really love to know it. Wachovia was a little better in that they pulled funds on your payment date rather than 5 days early, but it still bugged me. Wells Fargo is the worst by pulling funds 5 days prior to the payment date- meanwhile the payee doesn't even have the check in their possession much less done anything with it.

[gooddecisions]

"And if you sent it to an individual who never cashed it, then I guess it's free money for the bank because it's not in your account and it's not in their account."

I'm guilty of this because I never cash checks from my family and I don't mention it to them. I guess I will have to if they ever try to send me an online bill pay check because those funds will already be withdrawn.

[gooddecisions]

"I think this might be specific to your bank. I use paper bill pay checks to pay my rent, and the money doesn't leave my account until my landlord cashes the check, usually 2-5 days after the due date. I can also see the signature/stamp on the back of the check image. This is with Bank of America."

Good to know, maybe I will make the switch to Bank of America. I've heard good things about their online banking.

[ontrack]

Aug 9, 2011 14:53:50 GMT -5 gooddecisions said:

"And if you sent it to an individual who never cashed it, then I guess it's free money for the bank because it's not in your account and it's not in their account."

I'm guilty of this because I never cash checks from my family and I don't mention it to them. I guess I will have to if they ever try to send me an online bill pay check because those funds will already be withdrawn.

Having someone not cash a check can really screw you up when you try to balance your checkbook. I had to account for one for months, and it got really aggravating. Although if your family aren't big on checkbook balancing, they might never notice.

[gooddecisions]

Nobody in my family lives close enough to the edge to bother with balancing a checkbook. We just use online banking to verify what's coming in and going out. But, I agree it's probably not very nice to ignore checks. They like to give me a check to refund my travel costs to visit, but I can afford it and have told them in the past it's not necessary. So, when I receive a check in the mail a few weeks later, it goes in the shredder. That is, until the day I notice it's a dang bill pay check.

[nittanycheme]

My bank just puts a hold on the funds if they send a paper check. So, when I look at my available balance and my actual balance, they will be different. As a nice feature, if they are different, I can the available balance becomes a link that I can click to see what is being held. They do the same thing for credit card charges.

[Deleted]

We were also part of the Wachovia to Wells Fargo experience. I use Quicken, not the bank bill pay. To verify everything worked properly, I sent myself a check for $5 using Quicken and WF sent me the check. I knew iit was deposited...how could I not, but on the WF website it showed my check just as if I had hand written it. It also did not show the funds were withdrawn before I deposited the check.

I think you may be worrying needlessly.

[gooddecisions]

I don't use Quicken, so I don't know anything about that. But it says clearly on the Wells Fargo page that funds are drawn when it's sent not cashed/deposited. Wachovia also pulled funds when it was sent but the sent date was the payment date. So I don't know where that money is when it's not in your account or the payee's.

Because Wells Fargo processes bill payments differently, funds will be withdrawn from your account 1 to 5 business days earlier than they were at Wachovia.
•At Wachovia, funds were withdrawn from your account on the Pay Date (the date your payee received your payment).
•At Wells Fargo, we begin processing your payment and withdraw funds from your account on the Send On date, which is 1 to 5 business days before your payee receives your payment.

[Deleted]

I understand....it just isn't a concern of mine. I know with Wachovia, my available balance vs processed balance did not account for checks issued until they were actually cashed. If they did take it out earlier, then send the check, I had no knowledge of it. Same goes for WF.

I pay using paper checks from Wach/Wells infrequently, so perhaps I just never paid any attention to it.

Interesting question though, thanks for posting.

[stl76]

I use US Bank. I was under the impression that the reason most of the time it comes out on the date that you set it up for is because that's when they cash (they say set it up for the date you want your check cashed). It doesn't always come out on that date though. So I am assuming they send a check that is dated for the date you set it up for and the company cashes it on that date. If you send a check to somebody and they don't cash it, the money does not come out of your account or at least that's what I assume. Never ran into a problem of a biller not getting paid and I have been using online bill pay for years.

[april47]

I actually like it that way. When SS is put in I automatically take my my check to the office of my apt but they take forever to put in the bank. I would love to put it on bill pay and have it out automatically and immediately like everything else. Its the only darn check I write but the office says they dont do bill pay.

[jkapp]

Aug 9, 2011 14:28:07 GMT -5 gooddecisions said:

When a bank sends a paper bill pay check, why do they take the funds out of your account on the send/delivery date rather than when the payee cashes/deposits the check?

This has been my one and only complaint about online bill pay. I don't want to go back to mailing my own checks, but cringe at the thought of not really knowing if the payee actually received my check. Wells Fargo takes the funds out on the send date and the send date is 5 days before the so-called "payment date", but you never really know if the sender got it unless you get hit with a late fee- and that could create more problems- meanwhile that money is long gone from your account.

I agree with others, that must be specific to your bank...my money doesn't come out from bill pay payments until the check clears. (I use US Bank)

[gooddecisions]

Are you sure you can't set up an individual in your billpay system? You just enter the name and address and it will be sent through the mail. I do this with my homeowner's association. They don't take electronic checks, but they will take a check through the mail regardless of whether it's issued through my bank or me.

Speaking of which, this issues really only concerns me when I send a check to an individual via bill pay since I know it will be a paper check through the mail. I email them ahead of time saying it comes in a non-descript envelope and the funds will have already been withdrawn from my account so don't rip through the envelope thinking it's junk mail or hold on to it without cashing for my benefit.

I can recall one time I paid a bill and my next statement had a late fee on it along with the balance from the month before. I called the utility company and they said they didn't receive it. It had been pulled out of my account right on time so I called Wachovia and they put the funds back in my account so I could write a new check. It did make me wonder how many non cashed checks go unnoticed. I'm just glad it was the utility company and not a credit card.

Here's more about their process, but I'm still dying to know the "why" behind it. These aren't certified checks or money orders to be withdrawn this way.

At Wachovia you selected a “Pay Date” for each payment. At Wells Fargo, we ask you to enter a “Send On” date.
•The “Send On” date is when we begin to process your payment and remove funds from your account.
◦Funds will be withdrawn from your account up to 5 business days earlier than they were at Wachovia. We begin processing your payment and withdraw funds from your account on the Send On date, which is up to 5 business days before your payee receives payment.* Over 80% of Wells Fargo payees accept electronic payments, and the average transaction time for those is 2 business days. If a payee doesn’t accept electronic payments, it could take up to 5 business days to deliver a paper check by U.S. mail. Some Wells Fargo Bill Pay payees accept same-day payments (same-day payment fees may apply).
◦You must have sufficient funds available in your account on the Send On date to cover your Bill Pay payments. Not having sufficient funds could result in a missed payment, overdraft, late fee, or other charge. To help avoid problems related to insufficient funds, you may want to consider adding overdraft protection to your payment account.
◦Funds are withdrawn from your account after 7:00 pm Pacific Time on the Send On date.

[xia]

Definitely bank specific.
I use Navy Federal to pay bills with and the funds stay there till the payee (Cable Company) actually cashes the check. Not sure why but my cable company is the only one of my bills where actual paper check is issued, rest of my bills are just direct transfers between banks (I assume).

[thyme4change]

why do they take the funds out of your account on the send/delivery date rather than when the payee cashes/deposits the check?

Because they can.

[gaultamort]

When we broke up with the big bank and went to mid-sized IL bank before the credit union, I learned all about this.

Basically, banks have third-party vendors that actually execute payments for the bank. So, it totally depends on how your bank has this set up. For me, the large bank took the funds right away--even if it cut a paper check. Now, the mid-sized bank doesn't take any money out until the check is actually cashed even if you pay it online through autopay.

The latter makes me crazy because it's hard to really know exactly how much in there, but the account is never low enough to make this an issue. I haven't done anything beyond set up my credit union account yet, so I'm not sure how it handles the issue.

[Clever Username]

Chase falls all over them in their ads and literature about fighting for you about payments being made.
I've been on the other side of these conversations with checks mailed to work.
You don't want to mess with these guys.

[michelyn8]

Aug 9, 2011 15:01:59 GMT -5 gooddecisions said:

"I think this might be specific to your bank. I use paper bill pay checks to pay my rent, and the money doesn't leave my account until my landlord cashes the check, usually 2-5 days after the due date. I can also see the signature/stamp on the back of the check image. This is with Bank of America."

Good to know, maybe I will make the switch to Bank of America. I've heard good things about their online banking.

Its the same with Suntrust and like BofA they make a point of telling you that the funds will not clear your account until the check is presented for payment. Its their way of reminding you that if you don't have the money in there when the paper check goes out , you may want to get them in there toot sweet or risk a bounced check.

Seeing your post about Wells Fargo makes me even happier I told them to go take a flying leap last year. No way would I be comfortable with them "holding" my money like that. I have one bill pay that's a paper check going to my cousin's storage locker business. I went in there a week after should have received the check and found myself locked out for late payment. His daughter told me she hadn't seen the check so we made alternate arrangements and she returned the check to me when she received it - another week after my visit.

[rmtvbrooks]

Everyone is right...how this is handled varies by bank. I bank with USAA, and the funds do not come out of my account until the check is cashed. I only have a couple of places that a check has to be sent because most are submitted electronically, but my water, trash/sewer, and DD's horseback riding all have to have physical checks. I go ahead and deduct it in my register, but it doesn't come out of my account until the receiver cashes the check. The main advantage to that is that I can request the check a couple of days before my paycheck goes in and it's not a problem. I make sure I deduct it, though, so I'm not counting on that money being there. I can see your concern with it coming out prior to them actually receiving the check; you'd have no way of knowing if they received it. I'd consider finding a bank that does it the way USAA does it (or any of the other banks people have mentioned). I always know that the person has received my check because the amount posts as well as an image of the front and back of the check (so I know who endorsed it). I'd look for a bank that provides you with that image.

[cronewitch]

My very first bill pay check with BOA years ago was to pay property taxes. They withdrew my money so I assumed the tax was paid. Months later the check they sent was returned to me as rejected by the county for being late. I had chosen the due date to have the money sent and they withdrew it but didn't send it on time. I called the county they guessed it was BOA and waived the late charges. The money was out of my account the months it took the county to send it back and BOA to send it to me. Now I mail my own paper check for property taxes and pay everything else early. Charles Schwab bank withdraws when it is cashed for paper bill payer checks. I don't use BOA any more for anything important.

[stl76]

"You just enter the name and address and it will be sent through the mail. I do this with my homeowner's association. They don't take electronic checks, but they will take a check through the mail regardless of whether it's issued through my bank or me."

I do the same for my HOA fees and it is sometimes not cashed 2 weeks after it is dated for. It definitely must be bank specific like others are saying.

[ontrack]

Aug 11, 2011 14:06:29 GMT -5 cronewitch said:

My very first bill pay check with BOA years ago was to pay property taxes. They withdrew my money so I assumed the tax was paid. Months later the check they sent was returned to me as rejected by the county for being late. I had chosen the due date to have the money sent and they withdrew it but didn't send it on time. I called the county they guessed it was BOA and waived the late charges. The money was out of my account the months it took the county to send it back and BOA to send it to me. Now I mail my own paper check for property taxes and pay everything else early. Charles Schwab bank withdraws when it is cashed for paper bill payer checks. I don't use BOA any more for anything important.

BoA must have changed their policies since then. Now, the money isn't taken out until the check is cashed/deposited--I can see the endorsement on the image of the backside of the check online.

[kadee79]

Good grief! Ya'al make me tired just reading all this!
I'll stick with writing my paper checks myself and balancing my checkbook accordingly!
Even though I have plenty in there for any purposes....I prefer knowing what is available at all times! And no, I don't use ATM cards either! Cash or paper checks written by hand/printed on store register works best for me!

[ontrack]

I like paying my rent with a bill pay check because it saves me a stamp as well as one of my own checks (which I have to pay for).