How to cancel a Direct Deposit Instruction

Jan 21st, 2015     Payments

Direct deposits are electronic funds transfer where funds are transferred regularly at a specific period as agreed by both the parties on the account. Direct deposits are usually set up for payroll, tax and bill payments etc. In cases where payments have to be made regularly it’s beneficial to set up a direct deposit. Direct deposits are easy and convenient way to process payments, there won’t be any issue of loss checks and regular visits to bank can be avoided.

Due to unforeseen situations there may be a requirement to cancel a direct deposit. In such situations to avoid losing the money customers should know how to cancel a direct deposit. Therefore, we have listed the steps below to make it happen –

• To cancel a direct deposit, the payor can contact the financial institute via telephone, branch or online and cancel it by following the procedure as directed.

• If direct deposit cancellation is being done after both the parties completed the agreement, then the payor can request the payee to fill a cancellation form and write down the main details such as reference number for the payment, routing number, name of the payee, reason for cancellation etc and then sign it. This paper work would then be signed and submitted by the payor to the bank and the direct deposit would be cancelled.

• In case where both the parties have agreed for cancellation verbally, then the payor can connect the financial institute via telephone banking and online banking to cancel the direct deposit. Usually via telephone and online banking the payor who wishes to cancel the payment has to give security information to be verified on the account. Then the payor should give the name of the direct deposit and reference number to ensure that the correct direct deposit is being cancelled on the account. Direct deposits can be easily cancelled with telephone banking and online banking services too.

• As a direct deposit payment takes up to 3 working days to be processed. The request to cancel the direct deposit should be made prior to the payment debiting the account. It’s better to cancel a direct debit few days prior to it debiting the payors account; because once the payment is processed electronically it’s not simple to reverse the funds. However few financial institutions have the facility of reversing the direct deposit on the same day when the payment is processed provided the customers adhere to the time quoted in the disclaimer for cancellation of direct deposits. To have a hassle free cancellation, it’s always best to cancel it few days prior to the payment debiting the account.

Situations in which cancellation of a direct deposit might be required:

Payee is closing the bank account: If the person who is receiving the payments in the form of direct deposits opted to open a new account with another bank by closing the existing account. Then it’s necessary for the payee to contact the payor and request a direct deposit cancellation form as the payor can then put a request for stopping the payment into the existing checking account. This way the payor can issue a check when the account is closed. Then a new direct deposit can be set up on the new account. By processing the cancellation before closing the account, the payee can benefit by getting the funds through other means. If the payee doesn’t inform the payor before closure of the account, the direct deposit would be processed and the closed bank account would receive the fund. Both the payor and the payee should connect with their respective financial institutes to get that amount by putting a trace for the payment. This can be troublesome and time consuming. Therefore to avoid any such issues it’s always sensible to cancel the direct deposits before closing the account.

Dormant/ Inhibit accounts: If the bank has put a stop on the payee or payors account due to any reason for example such as bankruptcy, it’s advisable to cancel direct deposits to avoid the trouble of tracing funds. Usually if the payor has a stop on the account the direct deposit may not debit the account, however it’s sensible for the payor to inform the payee that they won’t receive the funds. In case where bank accounts are not being used regularly there might be a dormant marker placed on the account, in such cases the parties should contact the financial institute and request to remove the dormant marker on the account as only then the direct deposit can be processed successfully.

Fraud investigation: Some times financial institutes block the accounts if they come across any fraudulent activities on the account, in such cases the payee should inform the payor to stop the direct deposits as there is a possibility of some fraud happening on the payee account and the it’s sensible to cancel the direct deposits as there would be a risk of losing the funds.

Agreement comes to an end: Usually direct deposits are set up when both the parties are in an agreement to pay and receive the funds. If due to any reason the agreement comes to an end. The parties should follow the procedure of cancelling the funds to avoid losing additional funds with the direct deposit being active on the account.

agrrement term ends

Cancellation Vs transferring direct deposits

If the payee (receiving direct deposit funds) wishes to receive the direct deposit to another checking account, the payee should contact the payor and inform the same. The payor would then get a direct deposit transferring form which should be filled by both the parties and sent to the respective financial institutes. The payor’s bank would take certain time to transfer the direct deposit to a payee’s new checking or savings account. Therefore the payor and the payee should get the time duration from the financial institutes involved to make arrangements for another mode of payment if in case the transfer takes long to be active. In some cases it might be faster to cancel and set up a new direct deposit on the account. Therefore both the parties should check the time duration and comfort while transferring a direct deposit, only it’s faster they can opt for it or else it can always be cancelled and set up too.

Few essential points are listed below to help customers deal with direct deposits easily:

• When there is an agreement between the payor and the payee a direct deposit form is filled out and signed by both the parties. The payors bank and payee (receiver of the credit) both send the paperwork to each other, when the details are confirmed and agreed a direct deposit is set up. This procedure can take up to 45 days or 2 months. Until the direct deposit is set up on the account the payee won’t receive the funds. Hence the payee and the payor should make other arrangements to transfer funds until the direct deposit is set up.

• The payee can always expect the direct deposit to reach the date as agreed in the agreement, however sometimes it can be 2 or 3 days different. Because direct deposits are only processed on working days electronically. If there is a Saturday or Sunday after the payments debiting date then the receiver may have to wait additional 2 or 3 days to receive the funds.

• If in case there are bank holidays or the bank is closed due to some reasons, then the direct deposit might appear 2 or 3 days after the holidays. Electronic payments would be processed during working days only. Hence the customers can always expect to see a direct deposit credit on a working day itself.

Payday Loans 101

Jan 21st, 2015     Loans

Payday loans are small loans that are provided to customers with a fee. These loans are usually available at loan stores and banks. These loans are given to customers during emergencies and the customer doesn’t have to go through a credit check to receive a payday loan.

Even though a no credit check might sound alluring for customers with a low credit score, it isn’t advisable to take a payday loan as these loans charge a high fee. Example: A loan of $200 can have a fee of $50. There are instances where payday loans interest rates rise as high as 400%. It’s likely to be more than that, if customer delays in paying a payday loan.

Procedure to get a payday loan

Payday loan at a loan store: Customer has to apply for a moderate amount of loan for the period required. This could be anywhere between 3 days to 4 weeks and more. The customer should write a post dated check for the total amount which includes the loan amount and fee. The postdated check would be written by the customer on the day the payday loan is agreed for, however the financial institution will not issue this check unless the customers agrees for it. As the customer who takes a pay day loan would inform the financial institute when to issue the check based on the availability of funds in their account. The postdated check acts as a guarantee for the payday loan.

Payday loans got the name payday, as most of the customers who utilize this loan take it for a short period of time and pay it on their payday (salary day). If the customer is unable to pay the loan on the due date, the fee keeps increasing on it. Therefore customer’s who delay paying payday loans pay high fees to the lenders.

Payday loans

Payday loan at banks: Banks also provide customers with payday loans, as they can earn money on the fees accumulated on such loans. Such loans with banks are also taken due to emergencies for a small amount and a short term period. The fees charged by banks are similar to loan stores. In case of certain banks the name of payday loans might appear differently but its features will be the same.

The customer can apply for a payday loan by contacting the bank; if customer and bank are in agreement then bank would debit the customers checking or savings account for the loan amount and the fee on the due date. If the customer doesn’t have funds to pay on the due day, there is a possibility that bank takes the amount from overdraft facility and charge interest on it. Also when banks give a payday loan, they deduct their payment before the customer’s mortgage or loans payments. For customers with tight financial situation it can be difficult to deal with a payday loan taken from a bank. Bank also charges high fees for payday loans, in cases where customer is unable to pay the amount the fee would be multiplied and added to the loan amount.

Hence this can lead to a situation, where a customer pays more than the amount borrowed in the form of fees. Therefore while taking payday loans customers should weigh its pros and cons, only if it’s an emergency where there are sure to pay back the amount as agreed it’s sensible to take a payday loan account. Because delaying the payment of payday loan can lead to an increase interest rate of 1000% too. It’s always sensible to avoid such situations.

Common scenarios where customers take payday loans and how to avoid them

Financial difficulties: Customers tend to take a payday loan when they are going through financial difficulties. It’s more likely for people without income to be attracted to these offers as they usually require a small amount to meet their expenses. Also if the customer has financial difficulties, they wish to pay off their payments quickly. As payday loans are easily available they opt for the same.

In such situations, it’s advisable that customer avoids a payday loan if they are not sure of paying it. As the fees on payday loan increases and it can be uneasy for them to deal with the high fees accumulated on it. Customer can opt for a job. Also customers in these situations can borrow from friends and family. If the customer has a good credit score, then it’s more sensible to take an unsecured loan or other small loans, as the interest compared would be lower than the pay day loans fees. However it’s advisable to do the same when customer is sure of paying back the funds, as failure to pay the amount can affect the credit score of the customers.

Low Credit Score: If a customer has a low credit score, they might opt for a payday loan as this wouldn’t require a credit check. So the customer feels better to get the funds this way, than through a small loan via bank. However, a customer with a low credit score might already have other payments to deal with. Hence in such situations, the customer must ensure that their payments are managed wisely, wherein they rent and other main payments should be made including the payday loan account. If customers fails to pay the payday loan situation can worsen even more. Additional part time jobs can be opted in such cases. It’s always advisable for customers to maintain a good credit score.

Emergency situations: In situations where customer run’s out of their salaries, is not able to access funds in account as cards are lost and bank is closed. There can be many such situations including car breakdown etc then customer might opt for payday loan. In such situations customers can try and check the overdraft facility offered by banks as it can be much lesser than the fee on accumulated on payday loan. If customers save some emergency cash in their accounts, it would be much easier to face such issues.

Apart from the above mentioned reasons there can be several other reasons why customer opts for payday loans, Whatever the reason and situations might be its always sensible for customers to use these loans only in case of emergencies provided they are sure to pay of the amount as per the decided due date. If customers are okay to pay the high fees for the late payments, then it’s okay to opt for a payday loan too.

, ,

Debit Cards 101 – Basics you should know

Jan 21st, 2015     Banking

Debit cards give customers access to the money in their checking or savings accounts. Customer with debit cards can use the cards for withdrawals of cash through ATMs and for making payments at most merchant locations or online. There is a magnetic strip at the back of the debit card; this strip has encoded data that make it possible to access the funds in checking account electronically. Recently, banks have also started issuing EMV chip debit cards which are considered more secure than traditional magnetic strip.

Debit cards

How debit card works?

Customers who store their money in checking accounts are issued with a debit card. This card is usually delivered by secure mail. Customers can visit the branch and collect the debit card too. Customers will also be sent a pin number along with their debit card. After receiving the pin number and debit card, customer should go to an ATM to activate the card. ATM will request the customer to enter the pin number after inserting the card into the machine. Bank will request the customer to sign behind the debit card after receiving it. As pin number works as password, financial institutes request customers to keep it private and confidential.

Customers have the options of changing their pin number by following the instructions on the screen. It’s simple and easy to use a debit card as all the instructions will be given to you on the screen after inserting the card into the machine. Apart from making withdrawals customers can use debit cards at stores to make purchases too. At a store customer can give the debit card to shopkeeper to swipe the card in the card machine. Sometimes customers have to enter their pin number into the card machine. After swiping the card, the machine will give two receipts of bill for the purchase made. Customer should sign on them and give one to the shopkeeper and keep one with them. These receipts work as payment proof, and the transaction will appear in the statement too. Debit cards can only be used for shopping, provided the retailers have the option for the same.

Cards Swipping Machine

Debit cards can be used online to make purchases as well; online customers may have to enter the pin number to process the payment. But that’s not the case with all transactions. Sometimes customers get to set up a security code through visa, maestro etc. These security codes act as passwords for making online purchases. Customers should follow the instructions on the screen and key in the required information online to make the payment successfully. Sometimes to make a payment online, you may just have to enter the last 3 digits at the back of your debit card to process the payment. This code is known as CVV, CCD and secure code. American express cards have this code on the front of the card. Usually the information required would be 16 digit card number, name, address, expiry date of card, security code etc

CVC code debit card

Benefits of debit cards

View balance: Customers with a debit card can view their balance by using their debit card at an ATM. For this the customer has to insert the card and enter the pin number on the machine, and then the customer has to select the option view balance to know how much cash is available in their account.

Safe and secure payments: Debit cards are issued to customers only after all security measures are taken by the financial institutions. Many banks call customers if there is any unusual activity on the account. If funds debited the account without customer’s consideration then the bank will run an investigation and credit the customers account if it’s proved that the customer didn’t make the payment. Visa, MasterCard, Maestro etc are famous debit cards issuers, these brands have their own security system to help customers process payment safely. Payments made via debit cards can always be investigated, any fraudulent activity can be traced due to security system set up on debit cards.

Saves time: Customers with debit cards don’t have to wait in branch to withdraw funds. Whenever customers require the funds, they can go to the nearest ATM around and withdraw funds as and when required.

Easy access to funds: If customers don’t have a debit card, they are limited to branch timings to withdraw funds. However when customers have a debit card they can use an ATM 24/7. Most of the ATM machines are open throughout without any closing or opening timings. Therefore customers have easy access to funds.

View recent transactions: Customers can check the recent transactions done at an ATM. This way customer can keep a tab on their expenses.

Transfer money to friends accounts: Some ATM’s offer customers to make payments to their friends and family after inserting a debit card.

Easy to carry: Compared to cash it’s much easier to carry debit cards. They require less space and are light in weight mostly.

Debit card rewards: Some customers get additional benefits for using their debit cards. For this they fill forms and enter contest where they cards accumulate points for making purchases at stores where these rewards are available. Later these points would give some gifts or benefits based on the contest and features offered.

Online shopping: With online shopping customers not only save their time but they also get the option of purchasing goods that are available in different parts of the world.

Therefore we see that there are many benefits of using a debit card, customers will experience different kinds of benefits once they start using them. Some banks, credit unions and online banks might offer additional benefits on debit cards such as low interest for international withdrawal and transactions. However the customers have to pay an additional fee to attain such features on a debit card.

Debit card Vs Credit Card:

The major difference between credit and debit card is that customers with debit cards use their own money stored up in the account and thus don’t have to pay any interest for using the same. However, customers with credit cards use banks or credit unions money and they have to pay interest for using the money loaned on the card.

Customers with credit cards have to make regular payments towards their credit card if any money is owned on the cards. If customers with credit cards fail to make a minimum payment as agreed in terms and conditions additional charges will be incurred on the account. Customers with debit cards don’t have any additional charges to pay until and unless they don’t go into a negative balance on the account.

, ,

FHA Loan 101

Jan 21st, 2015     Loans

FHA stands for Federal Home Administration; it’s an agency of United States government. FHA loans are home loans insured by the FHA. Therefore these loans are easily sanctioned than the other kinds of loans. Government insures the payment of loan just in case the customer fails to repay it. FHA loans usually have a small down payment; it can be anywhere from 3.5% and above. Due to which many customers are attracted towards such loans.

FHA loans

Who can apply for FHA loans?

Customers who are willing to buy a home with low down payment and are sure to repay it can apply for a FHA loan. FHA loans are easy to get as they are insured by the government. However not all financial institutions accept the application for the same. In such cases customers can apply elsewhere for FHA loan.

Before applying for a FHA loan, customer has to ensure that they are able to pay off such loans. These loans are granted for customers who have both low and high income provided they are able to prove that they have sufficient income to pay off the FHA loan. The customer’s credit income should be sufficient to pay the loan after subtracting all the debits on the account. Customers with low credit score are sanctioned FHA loans, however customers should be able to show that they can make the minimum down payment required for the loan.

The loan amount to be sanctioned would be based on the prices of the homes in the area customers are living in. If the customers are sure to get the loan after cross checking the above information, they have to fill a form and process it. If it’s acceptable, then the loan will be sanctioned.

Who should go for FHA Loan?

Customers who want to buy a home and prefer to do it via FHA, have to pay a fee to FHA to get the loan. Apart from that, customers have to pay an upfront mortgage insurance premium i.e. 1.5% would be added to the loan amount for the same. Sometimes the upfront mortgage insurance can cost more than the private insurance. Therefore it’s advisable for customers to calculate the mortgage insurance premium; if they find the charge sensible then they can opt for the loan.

The money earned by FHA in the form of upfront mortgage insurance and fees are used by the government to pay off the financial institutions in case the customer fails to make the payment at a later date.

Due to the additional charges incurred on FHA loans, customers with good credit score can opt for a normal home loan. As the down payment for a home loan for customers with decent credit score might be lower or same as an FHA loan. Hence it’s advisable that customers do a proper research and apply for a FHA loan only if they feel it’s beneficial than any other loans.

Advantages of FHA loans

FHA loans give an opportunity to low income and bankrupt customers to settle down in life: Customers with low credit score have a difficulty in getting loans sanctioned. However that’s not the case with FHA loans. Customers with low incomes and credit scores are given a chance and are likely to get the FHA loan sanctioned. Due to which these customers have the opportunity of setting up a home. Customers who are bankrupt and have experienced 2 to 3 years of financial struggle are qualified to get a FHA loan. This gives them an opportunity to get a FHA loan which can help the settle down in life.

Low down payment: The down payment of FHA loans can be comparatively lower than the other loans, this way customers can get a home by paying a decent amount.

No prepayment penalty: Usually when customer take a mortgage loan and wish to repay it in full before the term expires there are charges or additional fee for the same. However it’s not the same with FHA loans. Customers with FHA loans can repay the loan in full and they do not have to pay a penalty for the same.

Loan can be taken over by another person: If the customer who took the loan is unable to pay back the loan, then the FHA loan can easily be taken over by another person. In this case the second person who takes over the loan might get the benefit of paying lower interest, provided the 1st customer completed paying the high interest’s rates on the loan. FHA loans interest rate might reduce less after a certain period of time in most cases; this would be agreed while signing up for the loan.

FHA 203k loan for repairs and development of loan: In order to avoid the hassles of 2 loans and additional paperwork. FHA 203k loan sanctions loan for home and also repairs of the home. These loans might take longer than the FHA loan. However the complete loan would cover the purchase of home and also an additional amount for its repairs. There are certain guidelines that have to be checked before applying for same. In some cases certain repairs may not be acceptable by the FHA 203k. With this program customer can enjoy the benefit of one loan instead of applying for two loans.

Easy to get: FHA loans are comparatively easy for customers to get than any other loans, as these loans do encourage a wider range of customers and can be easily sanctioned.

FHA loan does have its own features and benefits; even then it’s always advisable for customers to check different kind of loans and features before applying for a loan. Only if the customer is sure that they are getting the best deal with the FHA loan then they can opt for it.

, ,

Credit Union Members

Dec 15th, 2014     Credit Unions

Credit Union members are none other than the customers of the credit unions. Customers are known as members once they signed up with the credit union. Members of the credit union are the owners who share a part of the business. All the members have to participate while being a part of a credit union.

Who can be a member of a credit union?

To be a member of a credit union the customer should be eligible for the same. In many cases this depends on the existing members of the credit union. Some credit unions require special features such as certain locations, interests, place of work, friends, family etc. New credit unions are usually set up by people who have a strong bonding among themselves. When they understand that their financial requirements and preferences can be met together as a group, then, they might as well start a credit union.

Member’s Management

As the member of the credit unions are the owners of the credit union they manage the credit unions, however, employees are hired to run day to day operations at the branches. If the members have different interests and opinions then decisions are taken via voting system. Every member is eligible for one vote only. Voting doesn’t depend on the amount deposited in the accounts. All share equal right to vote, without discrimination.

Usually the main decisions are taken by board of directors who are voted and set up by all the members. Usually credit unions are formed when people have a good bonding among them; hence consequences of clashes are few. However, there is a possibility for the same due to human tendency.

Voting System

How to become a member of a Credit Union

If you’re interested to be a part of a credit union, then check information online about the credit unions in your geographic location. If you find a credit union, wherein there is a requirement for members and wherein you meet the criteria for becoming a member. Then fill the form online or go to the respective credit union branch and follow the steps of becoming a member.If you’re interested to be a part of a credit union, then check information online about the credit unions in your geographic location. If you find a credit union, wherein there is a requirement for members and wherein you meet the criteria for becoming a member. Then fill the form online or go to the respective credit union branch and follow the steps of becoming a member.

If you’re aware of friends, colleagues or family who are already members of credit unions, take information from them and check if you’re eligible and open an account with credit union. It’s a must to meet the criteria to become a part of credit unions.

You can be a member of two or more credit unions provided your eligible to open the accounts while meeting the respective criteria set up by the members of the credit union. A proper research through the internet or from family and friends shall certainly help you find a reliable credit union, wherein you can enjoy the benefits of earning high interest on savings or else paying less interest on loans compared to that of banks.

Services and benefits enjoyed by members of credit unions

Members of credit unions are also the owners; hence they get special attention and superior service while enjoying profits of the credit union. As there are no shareholders involved in credit unions, the members share the profits among themselves. Credit union enjoy other benefits and services, such as

Free checking account or low fee checking account: Some credit unions provide its members with free checking account; such accounts don’t require any minimum balance to be maintained. It’s also likely that most of the credit unions offer checking accounts with low maintenance balance and low fees.

High interest rates on Savings, Money market accounts and CD’s: Credit unions usually offer high interest rates for deposits.

Low interest on Mortgage and Loans: Members of credit unions can take loans and mortgages while paying low interest for them.

Credit cards with low fees and interest rates: Members of credit unions can enjoy paying low interest on credit cards, also they generally have an annual fees which is comparatively low.

Insurance: Members of federal credit unions have insurance coverage up to $250,000 by the NCUA; therefore they are assured that their money is safe. Other credit unions have private insuranceInsurance: Members of federal credit unions have insurance coverage up to $250,000 by the NCUA; therefore they are assured that their money is safe. Other credit unions have private insurance.

Online banking: Members of credit unions can use almost all the features of online banking, right from international payments to checking balance online.Online banking; Members of credit unions can use almost all the features of online banking, right from international payments to checking balance online.

Direct Deposits, Standing Orders and Wire Transfers: Members of credit unions can set up and use all these features to make their payments on time.

Investments and Safe Keeping: Members of credit union can use investment services and safe keeping services too.Investments and Safe Keeping: Members of credit union can use investment services and safe keeping services too.

We can clearly see that credit union members enjoy a varied range of benefits and services while sharing the profits too.

, , , ,
1 2 3

This blog is maintained by editorial team.
'Banks America' provides educational articles on banking, financial products, and other banking related usable information to it's readers. This information should not be perceived as financial advice. Banks America also maintains the most updated banking directory of bank branches and credit union branches along with their routing numbers and swift codes.