A recent change to the Automated Clearing House (ACH) system could result in unnecessary overdraft fees being charged to your bank or credit union account. It’s important for you to understand how this change to the ACH system could impact your financial accounts.
As of September 15, 2017, ACH debits may be withdrawn from your account during the day on the same day that they are made. In the past, debits came out of your account at the end of the day or perhaps on the next business day. What this means is that ACH debits can now post to your account during the day before funds are available in your account to cover them.
Some examples of ACH debits include:
- Recurring payments, for example paying your rent, mortgage, phone bill or other monthly bills automatically
- One time electronic bill payments, for example paying a credit card bill electronically
- Writing a check to a store that converts it to an electronic payment (paper check conversion)
ACH debits can now clear on the same day they are initiated. For example, if you write a check at a retailer and it is converted into an electronic payment, it can clear the same day it is written. If you authorize your mobile carrier to pay your monthly bill electronically, your account may be debited the same day.
If an ACH debit comes out of your account before you have the time to make a deposit or before you have funds available in your account, your bank account could become overdrawn and you could face costly overdraft charges.
Remember that your financial institution has no control over when ACH debits are received. In fact, the new rules for Same Day ACH adopted by NACHA require your bank or credit union to honor the ACH debit on the day it is received. Therefore, you may need to make changes to ensure funds are available in your account to cover your debits.
Follow these tips to help avoid overdraft fees:
- Check your account before authorizing a payment to ensure the available balance can cover the bill.
- If you have automatic recurring bill payments, such as a monthly bill or mortgage payment, review your agreement with the service provider and verify the effective date of your payment.
- Remember to account for any recurring bill payments on the day that they will come due.
- Consider setting up overdraft protection, but understand any fees involved.
If you do happen to have an overdraft from an ACH debit, be sure to take care of it promptly. An overdraft will not impact your credit report or your credit score as long as it does not go to into collection. However, repeated overdrafts at your bank or credit union could cause your financial institution to close your account. The closure of your account might be reported to a specialty consumer reporting agency such as ChexSystems.
