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Sometimes paying bills or paying off debts via electronic payment is a convenient method of payment. However, there may come a time when you need to have these payments stopped. Learn how to place a stop payment on an electronic payment.
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What is an Electronic Payment?
An electronic payment or electronic funds transfer basically is any payment that does not require the use of a physical payment such as a check, credit or debit card. Many billers, such as utility companies are increasing the use of electronic payments for monthly bills. Many will offer discounts and special incentives to set up automatic payments. Stopping electronic payments depends on the type of electronic payment made.
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Types of Electronic Payments
There are three basic types of electronic payments or EFTs, according to ElectronicPayments.org - Direct Deposit, Check Conversion and Preauthorized Debit. Many consumers do not need to worry about stopping a direct deposit since most consumers are the recipients of direct deposit. However, preauthorized debits and check conversions are the types of electronic payments consumers may wish to place a stop payment.
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Placing a Stop Payment on Electronic Funds Transfers
A preauthorized debit is being deducted from your checking account every month. For a banking account, this can be set up one of two ways:
- Via debit card
- Via ACH debit
When you use your debit card to set up a preauthorized electronic payment, it is treated similarly to a credit card recurring transaction. You may need to stop the preauthorized debit with the biller first. It is best to receive some form of written confirmation from the biller acknowledging the preauthorized debit arrangement was terminated or canceled. Once you stop the arrangement with the biller, contact your bank to advise you wish to stop payment on the next scheduled payment and all subsequent payments. Make sure to follow all instructions your bank provides you with to ensure future debits do not hit your account.
For preauthorized payments coming directly from your checking or savings through the Automated Clearing House (ACH) Network, you will need to cancel the next scheduled payment at least three days prior to the pay date. Some banks allow you to do this over the telephone or online while others may require a written request or form to be sent back to make the stop payment request stick. Check with your bank to find out what their specific stop payment policy is for electronic payments.
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Placing a Stop Payment on Check Conversions
Another type of electronic payment is check conversion. Check conversion is when the merchant or biller takes the information from a physical check and processes it electronically. This is done to bypass having to deposit the check and waiting for it to clear, which can take up to a week. Unfortunately, cancelling a check conversion that took place ‘Point of Sale’ at the merchant's place of business, is nearly impossible. Check conversions can be debited from your account the same day they are processed via the ACH network. This prevents you from requesting a stop payment before the transfer is sent to your bank.
If you mail in your physical check for payment and wish to have it stopped be sure to make this decision as soon as possible. The business you wrote the check out to can convert the check into an electronic payment to speed up payment processing. All stop payment requests need to be made before the debit request is placed on your account. If you send your request after the business initiated the check conversion, your bank may not be able to stop the transfer.
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Best Practices for Stopping an EFT
These tips will aid you in having your bank honor your stop payment request:
- For all, but especially for preauthorized debits, submit your stop payment request at least three days before the EFT is scheduled.
- For check conversions, make sure the stop payment request is sent to your bank before the EFT is processed.
- Make sure you become acquainted with and follow your bank's guidelines for stopping an EFT – such as fees for the requests and additional steps you need to take
These three tips will help you to stop payment on an electronic payment.
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Comptroller of the currency Administrator of National Banks - http://www.helpwithmybank.gov/faqs/banking_stop_payment.html
Your online bill payment options -http://www.bankrate.com/brm/news/ob/20040115a1.asp
Electronicpayments.org - http://www.electronicpayments.org/c/ind_checkconversion.cfm?hp=ind