How Money Leaves Your Checking Account


The cost of producing and delivering paper checks is very expensive and can be

disturbed by bad weather and other unexpected events. For example, the terrorist

attacks of 9/11/2001 resulted in the air transportation for the distribution of

paper checks to come to complete halt.

The ability for consumers to make electronic payments has been an available

option for some time. The Federal Reserve has only recently began making a

concentrated effort towards the electronic conversion of checks. Consequently,

consumers are being hit with more fees than ever for using their checking


These fees as well as the cost of using debit cards can make it hard to keep

tabs on how much money you have in your account. This can result in you bouncing

checks or overdrafting your account.

Outlined below are some of the common ways money leaves your checking

account. Knowing when and where your money goes will help you be more fiscally


Paper check

The use of paper checks is declining, according to the Federal Reserve.However, paper checks still result in over $60 million in payments annually.

The typical route of a check is one that crosses the country by common land

and/or air carriers until it arrives at its target bank and is either returned

back to you or stored.

Check conversion

Whenever a payment is made in a store with a check, it is typically converted

into an electronic image. The information from the check is amassed and a

one-time fee is subtracted from your account. At the conclusion of your

purchase, your check will be run through a machine, voided, and given back to

you. This procedure is commonly known as a point-of-purchase transaction. When

you mail a check in as a payment, an electronic image is created and the check

is destroyed. This sort of electronic debit is also known as an ‘accounts

receivable conversion’, or ARC.

Direct payment

A direct payment is for bills you pay every month, otherwise known as

recurring bills. Usually, you will set your checking account up to make

automatic monthly payments for your mortgage, auto loan, utility bill, etc..

Many people even use direct payment for making contributions towards investment

plans. These types of payments will be marked as an ACH payment on your

statement. Your bank will charge you a one-time fee for every direct payment you


Debit card

The use of debit cards has increased over the last few years. In fact, debit

card transaction are the fastest growing types of all bank transactions — from

9.5 billion in 2000 to 32 billon in 2006. Debit cards are most commonly used to

withdraw cash from bank machines, ATMs, by means of a personal identification

number (PIN), but can also be used in the same manner as a credit card for

making purchases. Users will be charged a fee every time they use their debit

card at the ATM or when they make a purchase.

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