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BUSINESS Tuesday 5 November 2019
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Liz Weston: Speedier payment systems could curb your costs

By LIZ WESTON Reports. Unfortunately, this trans-
Associated Press formation won't happen overnight,
Here's an illustration of the many even though we're already de-
ways slow payment systems can cades behind some countries. (Re-
inconvenience you and cost you al-time payments came to Japan
money. in 1973 and to Switzerland in 1987.)
Let's say Homer is two days from The Fed is shooting for implemen-
payday. The family checking ac- tation by 2024. In the meantime,
count at First Bank of Springfield is here are some steps that could
on fumes. There's just enough in the help you minimize the cost of slow
account, Homer thinks, to gas up payments:
his Plymouth sedan and buy Bart a TRY TO KEEP A CUSHION IN YOUR
Squishee at the Kwik-E-Mart. CHECKING ACCOUNT. Many finan-
But Marge checked the account cial planners recommend keeping
balance too, and thought she an amount equal to one month's
could safely buy groceries. Be- bills, but that may not be possible.
cause Homer and Marge didn't Even an extra $100 can help avoid
realize they were spending the overdrafts.
same money, one of the transac- HAVE ACCESS TO CREDIT. Charging
tions triggers an overdraft fee. Plus, an emergency expense or getting
they forgot the power bill is due, a cash advance from a credit card
and utility owner Mr. Burns charges is ultimately a lot cheaper than a
a wicked late fee. payday loan.
Homer hits up Lenny and Carl for a This April 2017, file photo provided by NerdWallet shows Liz Weston, a columnist DECLINE THE BANK'S "COURTESY
loan, but Lenny uses Venmo, Carl for personal finance website NerdWallet.com. OVERDRAFT" COVERAGE. This cov-
uses PayPal and Homer uses only Associated Press erage, also sometimes known as
Zelle. Lenny writes Homer a check, U.S. banks to update their pay- Many require both parties to have "bounce protection," ''courtesy
but it's from National Bank of ment systems, but the banking in- an account, and the cash can pay," or "overdraft privilege," is an
Springfield, so First Bank puts a hold dustry has balked. sometimes take days to transfer. expensive option that can trigger
on the deposit. Desperate, Marge Finally, after years of nagging, the We're still a long way from every- multiple $35 fees.
breaks into Lisa's piggy bank for Federal Reserve announced in one having the ability to pay any- Opting out means ATM and debit
money to pay the power bill, but August it's developing its own ser- one instantly. card transactions that exceed
has to pay a fee to "expedite" a vice, FedNow, that will allow all U.S. The current landscape underscores your balance will be declined. Or
same-day bill payment. banks to offer real-time payments. why the Federal Reserve needed you can choose the less expen-
The animated "Simpsons" television Big banks, predictably, aren't hap- to step in, says Lauren Saunders, sive "overdraft protection" that Iinks
show might use this scenario to get py. associate director for the National your checking account to your
laughs, but it's not funny for Ameri- That's because the largest banks Consumer Law Center. savings account or a line of credit.
cans who pay billions of dollars in have already created a real-time "It's just really important that a TRACK TRANSACTIONS, SET UP
overdraft charges and late fees , payment system through a pay- public entity that answers to ev- ALERTS AND CREATE REMINDERS.
thanks in part to antiquated pay- ment-processing company they erybody, and not just the biggest You can use a budget app to
ment systems. The most vulnerable own called The Clearing House. banks, have a strong role in mak- download and monitor bank ac-
people turn to high-cost payday The big banks have yet to con- ing sure that the payments work for count transactions, or check your
loans to bridge cash flow gaps, vince a critical mass of other in- everybody," Saunders says. accounts frequently online.
and some leave the banking sys- stitutions to make the investments Only the Fed, which is the U.S.' cen- Note every bill's due date on your
tem altogether because of high, required to connect to it, however. tral bank, can make sure faster calendar and set up alerts for low
unpredictable fees . Meanwhile, a bunch of person-to- payments are available at finan- balances, due dates and unpaid
It doesn't have to be this way. person payment systems — PayP- cial institutions of all sizes, which bills. Such vigilance is a hassle,
Many other countries have real- al, Venmo, Square Cash, Zelle and means consumers everywhere can but can save a lot of money while
time payments that clear almost so on — promise to move money benefit, says Christina Tetreault , we wait for real-time payments to
instantly. Federal regulators urged more quickly between individuals. senior policy counsel for Consumer arrive.q