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ING Earns Interest When You Send Checks

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According to Flexo, when you use ING Direct’s bill-paying check service, the funds are debited from your account immediately – not when the check clears. That’s a different of at least a few days because of how long it typically takes for a letter to reach its destination (2-3 days) and how long it takes for it to clear (1 day with Check 21). He asked whether other banks were the same and I can say definitely that’s not how it works at Bank of America, the only bank I’ve ever used the billpaying feature at.

With Bank of America, you enter in the destination address, payee, and a desired delivery date. I recently sent some money and a Bank of America representative actually called me up to confirm I had initiated the transaction (and not some thief). Incidentally, from what I can recall, he simply asked me for the destination and the payee so even if it was a phishing attempt he would’ve gotten zero useful information (plus he provided all the payment information anyway like the amount). The transaction was authorized, the check was sent, and the funds weren’t actually withdrawn from my account until the check was cashed.

You might ask “what’s the big deal?” It’s not really a big deal but it’s the principle of the matter. When you write a paper check, the funds aren’t withdrawn until the check is cashed and you are continuing to earn interest. Why shouldn’t ING’s system this way too?

A commenter on Consumerism Commentary said that Bank of America debits immediately too but my memory says differently, anyone care to corroborate either of the stories?

{ 13 comments, please add your thoughts now! }

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13 Responses to “ING Earns Interest When You Send Checks”

  1. Acero says:

    This is a Devil’s Advocate post.

    Sorry, couldn’t help myself. Too bad I couldn’t use the red background too. Personally, I agree it’s the principal of the matter but as Devil’s Advocate I would like to say at least we are still saving money by using INGs service.

    Let’s assume the average check someone writes is for rent, $500 to keep the math simple. The interest rate is 4% (compounding ignored for this case) and finally that the check is not cashed for 5 days (three in the mail, 2 for cashing.)

    (($500*.04)/365)*5 = $0.27397 or 27.5 cents. I have to say, that seems like a significant savings over my cost to buy stamps, a envelope and checks each year. I won’t begrudge ING the few cents pilfered on the deal. Please, someone else post the required rebuttal.

  2. Mase says:

    BoA debits immediately for all of my checks. I think it depends on whether they have a relationship with the company you are sending payment to or not.

  3. Acero says:

    Hey, thanks Jim, you’re awesome!

  4. jt001 says:

    It depends on how their bill payment service is implemented. Some use a “good funds model” which means the bank secures the money from you before sending out a payment. The risk based model means the bank will go ahead and pay before getting their money from you.

    I just switched from NetBank (risk model) to ING Orange and not 100% sure which model ING is using. I paid my mortgage a couple weeks ago and thought ING uses the good funds model. However the lender posted my payment on the same day I scheduled the payment.

    • jt001 says:

      Also, to clarify the good funds model; it is usually the bill pay vendor (Checkfree, Metavante, etc) that secures the funds not the bank.

  5. Mireille says:

    I’ve used BOA billpay for three years. In the beginning the amount deducted as soon as you hit the “submit payment” button, now it deducts no the “arrive by” date. I believe that with companies with which BOA has a relationship, it’s really and electronic transfer and therefore the arrival date is the check cashed date. With other entities, BOA probably just makes an assumption. On one hand, it’s bad because you don’t know if someone received their check with this method, on the other, BOA doesn’t have to worry about bounced checks through the billpay feature.

  6. Patrick says:

    I have no problem with ING’s policies. They are a much kinder bank than BofA. ING offers free overdraft protection – well, virtually free. I have overdrawn my checking account in the past and ING charged something like 20 cents… compared to what BofA would charge ($20 to $30), it’s no contest.

  7. Rob Carlson says:

    ING gives you interest before the cash clears from any deposits you make, which they don’t have to do, so I don’t fault them for removing the money from the interest calculation before someone else takes it from them.

  8. kev says:

    It’s been my experience that BoA debits the money from your account on or near the “delivery by” date and NOT when the check is actually cashed.

    A couple months back, I sent my mom a check through BoA’s online bill pay. It was set to be delivered to her on a Thursday (thought it didn’t arrive until a week later…a whole other matter) and the funds left my account that same day. However, the check wasn’t actually cashed by mom until two weeks later (due, in large part, to her not receiving the check for another week). So basically, BoA had two full weeks of earned interest on my money. I wasn’t too happy about that.

  9. Olivia says:

    Sorry – You are wrong on this one.

    BoA debits your account when the check is sent. I had one experience where the check was “lost in the mail” on it’s way to my student loan holder (I now use the student loan website directly than BoA’s automatic bill pay), and a more costly experience when I stupidly paid my mortgage twice via BoA’s bill pay. From the latter, I had 4 overdrafts leading to $140 in fees. Three of those were checks sent via online bill pay – one to my mother, one to the dog walker and one to my housecleaner. The other was a direct debit transaction. NONE of the three checks cleared the bank, because I called everyone and they all still had or had not even received the checks, AND the mortgage payment wasn’t credited for 4 days after the late fees were incurred. I was pretty confident that BoA would refund at least some of the fees when I called and pointed all of this out, but all they kept saying was “this was not a bank error and the account was debited in accordance with our policies.”

    As a direct result, I now have an ING account, but its too early for me to comment on that ;)

  10. JimmyDaGeek says:

    ING lets you schedule your paper check payments and deducts the money on the day it is sent, not cashed. If the check is not cashed within a certain amount of time, it will be refunded back to your account. Obviously, they are making money on the float, not you. I suppose that’s how they pay for their “free” bill pay. But they aren’t the only ones doing that.

    I prefer using bill pay as a safety feature, “pushing” the money, rather than allowing companies to “pull” the money from me. We’ve all read enough horror stories about zombie auto-debits that won’t stop.

  11. Bill Rogers says:

    Poor system if the credit union allows Metavante to issue checks when funds are not available. Here’s what happened:

    Day 1 – Metavante issues a check for bill payment

    Day 4 – Metavante discovers the account does not have sufficient funds – but it’s too late. Their check is already in the mail.

    Day 4 – The credit union learns there were insufficient funds and assess a fee against the members account

    Day 6 – Metavante tries to repost the transaction and discovers the account does not have sufficient funds and stops payment on their check.

    Day 6 – The credit union learns there were insufficient funds and assess a second fee against the members account

    Day 19 – The person receiving the check learns the check is bad and that payment had been stopped by Metavante. The recipient is charged a fee from his financial institution for processing the bad check.

    The end result –

    1. Metavante issued a bad check when funds were not available.

    2. The member was assessed insufficient fees twice.

    3. The credit union collected $50 for the insufficient fees generated by Metavante.

    4. The recipient of the check was charged $10 for processing an invalid check.

    5. The financial institution who accepted the check for deposit now refuses to accept checks from the credit union or Metavante.

    6. The member using the bill paying service is now looking for another service and the credit union bets a black eye.


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