Caution Best With Automated Banking
Crown Financial Ministries
It is almost impossible for a Christian living in this modern world to avoid completely all aspects of automated banking.
It is not biblically wrong or unethical to take advantage of the time and energy savings available through the use of automated banking; it is the misuse of automation that should be of concern.
In addition to checking, savings, and CD accounts, loans (both personal and business), and investments, some banks now offer a variety of automated services. Although these services are convenient, if discipline is not practiced in their use, they can lead to major budget and personal finance problems.
These automated services are offered by most banks, especially banks with nationwide offices: checking and savings accounts, telephone and online banking, Automated Teller Machine (ATM) cards, VISA and MasterCard check cards, direct deposit, payroll deduction, bill payer service, automatic debit, equity lines of credit, personal lines of credit, credit cards (both secured and unsecured), and overdraft protection.
Checking and savings accounts
A checking account is a good way to keep track of expenses, but it is not for everyone. Some people have a difficult time understanding and balancing a checking account; others just prefer cash.
Most checking accounts have a monthly fee, which is automatically deducted from the checking account. Some accounts don’t charge a monthly fee if a certain balance is maintained in the account. In addition to monthly fees, there also will be a charge for check and draft printing.
Other fees might include making more deposits or withdrawals than the bank allows each month or using an Automated Teller Machine (ATM) card. Be sure that all fees and charges are understood, including fees for returned checks, before finalizing a checking account agreement.
Telephone and online banking
Telephone and online banking allows customers to access detailed information on all of their accounts and loans. With this type of banking, customers can do anything from finding checking account balances to making loan and credit card payments by transferring funds from one account to another.
However, if customers do not write down their telephone or online transactions in their checkbook register or in their income/outgo financial records, telephone and online banking could become disastrous.
Many people use ATM cards to make purchases or to withdraw cash. These cards also are called debit cards, because each withdrawal or charge is automatically deducted from checking or savings accounts.
These cards are very convenient, but there are some cautions that need to be considered when using them. (1) Don’t rely on the balance from the ATM machine. The machine balance does not take into consideration any checks that have not cleared your bank. (2) Write down every ATM transaction in the checkbook register and save every receipt to verify the withdrawal. (3) Don’t use any part of a Social Security number as a PIN number. (4) Report lost or stolen cards immediately.
VISA and MasterCard check cards
Like ATM cards, Visa and MasterCard check cards are not credit cards; they are debit cards that are accepted as credit cards. Purchases are immediately deducted from checking accounts. Make sure that all check card transactions are written down in the checkbook register.
Direct deposit means that employees’ incomes are deposited directly into their bank accounts. This method of funding accounts is convenient, but it does have its drawbacks.
With direct deposit, there is no option to get cash back and often banks make mistakes and credit the wrong account. So, make sure the bank sends a deposit receipt after each direct deposit so that the receipt can be compared to the monthly account statement issued by the bank.
In some cases, such as garnishment or the payment of back child support, the courts will not allow direct deposit. But in other cases, such as Social Security entitlements, direct deposit is typical.
Payroll deduction is a method in which an employer deducts specific amounts from employees’ paychecks to pay for specific contributions, taxes, or benefits.
These could include deductions for Social Security and Medicare, federal and state income tax, city tax, union fees, hospitalization, life insurance, retirement, cafeteria plan, disability insurance, or any number of programs provided by an employer. Because employees never see the money, they never miss it.
Yet, although payroll deduction is a convenient way to pay for obligations and services, an employee still needs to confirm amounts that are being deducted and the purpose for the deductions.
Bill payer service
This service is also an automatic deduction program. Customers can choose to have the amount of their utilities, car payments, insurance premiums, mortgage payments, and any number of other bills automatically deducted from their checking accounts each month.
But there are some cautions that must be considered regarding this service. Always record in the checkbook register all automatic deduction transactions and the date of the transaction. Always compare the monthly statement with the checkbook register to confirm withdrawals.
With automatic debit, customers give permission for their checking or savings accounts to be debited for specific amounts.
Typically this is a one-time debit, but since bank account numbers have to be given over the phone or online, occasionally checking account debit scams can debit accounts numerous times without the knowledge of the account holder. To avoid any type of over-debiting on checking accounts, do not give checking account numbers to any telemarketer or in response to a mail solicitation.
Equity and personal lines of credit
An equity line of credit is credit guaranteed by a customer’s home equity. A personal line of credit is credit guaranteed by personal property, such as a savings account or a paid-off car. Customers can borrow against the line of credit simply by writing a check.
Using lines of credit is usually an unwise choice, because it encourages debt when there should be spending discipline and gives a false sense of financial security. In addition, funds borrowed against lines of credit have to be paid back, usually through an automatic checking account deduction, with a high interest rate.
Credit cards (secured and unsecured)
Most banks can issue either VISA or MasterCard credit cards, or both, to their customers who qualify for credit. Like money, credit cards are not bad; problems come when they are not used correctly.
The only time a credit card is of any real benefit is when purchases are restricted to a planned budget only and the balance is paid in full each month.
A secured credit card is one that is collateralized by a certain amount of cash that is placed in the bank that issues the card. Most banks require that at least 100 percent of the credit limit (some require as much as 150 percent but others require only 50 percent) be maintained in a savings or checking account in order for the credit card to be active.
Secured credit cards usually have an annual fee, but they have lower rates of interest than nonsecured cards.
Nonsecured credit cards are cards based on a customer’s credit history and his or her presumed ability to pay the bill. Many times, if the regular monthly payment is missed, the bank will debit the cardholder’s checking or savings account to cover the monthly payment.
Both a secured and a nonsecured credit card can be used to withdraw cash from an ATM. However, when a credit card is used to withdraw cash, the bank normally charges an immediate service charge, plus interest from the day the money is withdrawn.
Generally banks offer two types of overdraft protection. One type involves an automatic loan in which interest is charged from the day the loan is made until it is paid off.
The other type involves transferring money from a person’s savings account to cover the check short fall. No interest is charged with this type of automatic overdraft protection.
The fist type of automatic overdraft protection is one of the worst services in banking and is certainly one of the quickest sources of debt for undisciplined people who don’t balance their checkbooks. In addition, it encourages them to use credit when they should really be disciplining themselves.
“The plans of the diligent lead surely to advantage, but everyone who is hasty comes surely to poverty” (Proverbs 21:5).
Although most banks provide a vast array of convenient services and programs, people must pay close attention to the stipulations of each service offered and how it will affect family budgets and finances.
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