EFFECTIVE SEPTEMBER 15, 2017
When using your debit card or writing a check, have you gotten used to some lag-time between the transaction and the money clearing your account?
This will be going away – for example, if you pay your cable bill by telephone in the morning, the funds could be cleared from your account before 5:00 the same day.
On September 15, the Federal Reserve will start processing same-day ACH (Automated Clearing House) debits. These can originate from your credit union transactions or if you’re shopping at your local supermarket or other retailer. Whether you choose to use your debit card or a check won’t matter, as large retailers can opt to convert checks to ACH, the same system that clears your debit transactions.
3 Tips to be Prepared
- Don’t Assume Funds Will Clear the Day After Purchase: Habits can be hard to break. Get in the habit now of planning for funds to clear at the time you swipe your card.
- Check Your Share Draft Balance: Keeping a low balance can have a negative impact in the event a same-day ACH debit overdraws your account and incurs a fee. Even with overdraft protection, keeping your account balance at a level that supports your spending is the best way to keep your account in the green.
- Ask Questions at WCU: We are here to help! Leading up to and after this change occurs, watch your statements for additional announcements. And as always, please contact us by phone, email, or stop into our branch to ask any questions that you may have!
More helpful tips for Debit Card holders
- The credit union has no control over when transactions clear your account. It depends on when the company you scheduled the transaction with batches their transactions for the day. We also don’t control whether your direct deposit will go into your account before any transactions are processed that day.
- When purchasing gas, if you process your card as debits, the company will often automatically hold $50-$75 even if you don’t purchase that much gas. To avoid this, run your card as credit, or pay at the register.
- Always make sure that there is money in your account to cover the transaction before making a payment so you don’t overdraw your account. )
- When reviewing your account balance online, please be sure to look at the “Available” amount, not the “Balance.”
- Debits, or transactions that you make with a debit card will “hold” the money, but not fully debit it from your account.
- However, the “*Available” will be the amount that you have to actually spend after the held money has been accounted for *after you have subtracted all other debit transactions you have authorized on your account that may not show as pending or cleared yet. (Example: Checks you have written but have not cleared yet, Debit Card swipes you have made but are not showing as pending yet, Online/Phone Orders or Payments you have made but are not showing as pending yet, ACH debits you have scheduled to come out on a certain date but are not showing as pending or cleared yet, etc.)
What is a debit card hold?
When you use a debit card, the store clerk usually contacts the financial institution that issued your card to get an authorization. When the approval is given, the balance in your checking account is reduced or “blocked” by the amount of the purchase. This is known as a pre-authorization hold. The merchant determines the amount of the hold. The Debit Card Processor establishes the length of time the hold remains in place. Typically the hold stays on your account until the funds are transferred to the merchant from your financial institution, often 3-4 days. If you look at your account online it may show as a pending transaction.
How can a debit card hold create problems?
In a few situations, the dollar amount of the transaction is unknown when an approval is given. This may happen when you check into a hotel room, rent a car*, pay for gas at the pump or use your debit card to pay for your meal at a restaurant. In each of these transactions, the merchant may get an approval for a higher (estimated) amount– allowing for a tip, room service, additional or higher purchase amounts. Let’s say you have $60 in your account when you use your debit card to pay for gas at the pump. Since the purchase amount is unknown when you insert your card, the merchant requests an authorization for $50. The authorization causes a hold to be placed on your account for $50 and your available balance is reduced to $10. If you only purchased $20 in gas you may believe you have $40 available in your account. Unless you understand how a hold affects your account, your debit card could be declined in future transactions. This can be embarrassing and inconvenient. It could also be costly. If checks or other transactions are processed before the hold is released you may overdraw your account and incur overdraft fees.
Example of a Debit Card Transaction Hold
If you have a balance of $100 in your account and use a debit card to make a purchase at a retail store for $30, your available balance will immediately decrease to $70. This is because the merchant has obtained an authorization hold from your credit union by swiping the card through its credit card terminal. The actual balance with the credit union is still $100, because the merchant has not actually collected the funds in question. Unless this authorization hold expires without being finalized, you cannot access the held amount.
The actual balance will not be reduced until the merchant submits their batch of transactions to transfer the funds, which may take up to three business days. The best way to avoid any difficulties with debit card holds is to closely and constantly monitor your account and to read any mail from your credit union that might change the rules and regulations of card use.
How can you avoid these problems?
- When you use your debit card in a situation where the merchant may estimate the charge (hotels, car rental*, paying for gas at the pump, restaurants), the following tips may help you avoid some frustration:
- When a business asks for your card in advance of service – ask if the company will request a pre-authorization hold, the amount of the hold, and how the amount is determined. Be sure the hold won’t exceed your account balance.
- Pay the charges with the same card you used at the beginning of the transaction. Ask the clerk when the hold will be removed.
- Prior to making a purchase that will involve a payment with a different card, by cash, or by check, inform the clerk of the different form of payment and inquire about their policy on reversing holds.
- Ask your financial institution if they offer an overdraft line of credit or another product that will cover overdrafts. Learn how it would work and how much it costs. Look for a plan that automatically covers the overdraft and does not involve a separate decision by the financial institution as to whether or not to pay the overdraft each time. There may be a fee or interest charged on this plan. However, the cost is usually less than an overdraft charge and the item would be paid.
- Pay inside not at the pump.
- Consider using another method of payment (cash, check or credit card).
Tips for Debit Card Safety
- Immediately sign the back of your card when you receive it.
- Treat your card like cash, keep it in a safe place.
- Thoroughly review and balance your account statements.
- If you have been given a PIN (personal identification number), memorize it — never write it down.
- When choosing a PIN, avoid obvious choices such as your date of birth or telephone number.
- Never carry your PIN with your card.
- Do not tell anyone your PIN.
- When entering a PIN, position yourself to shield the keypad so that others cannot observe your numbers.
- When you no longer need your receipts or statements, don’t simply discard them– shred them.
*Many car rental agencies will not accept debit cards.
Saving for retirement is a very smart financial decision to make. It may seem like a long way off to younger people, but it is very important to plan for your future. It becomes even clearer to people nearing the age of retirement just how important retirement accounts are.
There are three popular types of retirement accounts to consider when thinking about where to put your money for your future: 401k, Traditional IRA and Roth IRAs. Let’s take a look at each type with a little more detail.
Perhaps the most straightforward of the three is the 401k. The 401k is a retirement plan that allows eligible employees of a company to save for their retirement on a tax deferred basis. The contributions that the employees make towards their account are deducted from their salary pre-tax. Only employers can sponsor a 401k account, an individual can’t open one up on their own.
A Traditional IRA account is for anyone with an earned income that is under the age of 70 ½ . With this kind of account your contributions are tax-deductible on your state and federal tax returns the year you make the contributions. You can only contribute $5,500 ($6,500 if you’re age 50 or older) per year with this kind of account. When you withdraw your money, it is taxed at normal rates. When you get to the age of 70 ½ , you must take at least a minimum mandatory withdrawal from your account whether you need the money or not.
A Roth IRA is a retirement account that allows a person to save for retirement as long as they are under certain income brackets. If you are single and make under $133,000 per year, you can open a Roth IRA. For married couples, your earned income must be under $196,000 per year. Like the traditional IRA, you can only contribute $5,500 ($6,500 if you’re age 50 or older) per year. With Roth IRA accounts, both the earnings on the account and the withdrawals after age 59 ½ are tax-free. You don’t ever have to withdraw your money from a Roth IRA account if you don’t want to. If you have enough income from other places, you could let your Roth IRA grow tax-free for most of your life, making the account an ideal wealth transfer tool.
There is a lot to consider when thinking about saving for retirement. Different accounts hold different pros and cons that depend on your individual needs. Always research and be knowledgeable about how you are going to save for your future.