How do automated teller machine (ATM) and other electronic transfer transactions work?

There are various transactions that fall under the umbrella term “electronic funds transfer.”

Automated Teller Machines (ATMs). You can bank electronically and get cash, make deposits, pay bills, or transfer funds from one account to another. ATM machines are used with a debit or EFT card and a code, which is often called a personal identification number or “PIN.”

Point-of-Sale (POS) Transactions. Some EFT cards can be used when shopping to allow the transfer of funds from your account to the merchant’s. To pay for a purchase, you present an EFT card instead of a check or cash. Money is taken out of your account and put into the merchant’s account electronically.

Preauthorized Transfers. This is a method of automatically depositing to or withdrawing funds from an individual’s account, when the account holder authorizes the bank or a third party (such as an employer) to do so. For example, you can authorize direct electronic deposit of wages, Social Security, or dividend payments to their accounts. Or, you can authorize financial institutions to make regular, ongoing payments of insurance, mortgage, utility or other bills.

Telephone Transfers. You can transfer funds from one account to another-from savings to checking, for example-or order payment of specific bills by phone.

People who use EFT systems are often concerned about safeguards in the system. Since there is no check-no piece of paper with information that authorizes a bank to withdraw a certain amount of money from your account and pay that amount to another person-EFT users wonder about recordkeeping, errors, and theft:

Recordkeeping. When you use an ATM to withdraw money or make deposits, or a point-of-sale terminal to pay for a purchase, you get a written receipt–much like the sales receipt you get with a cash purchase- showing the amount of the transfer, the date it was made, and other information. This receipt is your record of transfers initiated at an electronic terminal.

Your periodic bank statement must also show all electronic transfers to and from your account, including those made with debit cards, by a pre-authorized arrangement, or under a telephone transfer plan. It will also name the party to whom payment has been made and show any fees for EFT services (or the total amount charged for account maintenance) and your opening and closing balances.

Your monthly statement is proof of payment to another person, your record for tax or other purposes, and your way of checking and reconciling EFT transactions with your bank balance.

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What should I do if I find an error related to an electronic fund transfer or ATM transaction?

If you believe there has been an error in an electronic fund transfer relating to your account:

1. Write or call your financial institution immediately if possible, but no later than 60 days from the date the first statement that you think shows an error was mailed to you. Give your name and account number and explain why you believe there is an error, what kind of error, and the dollar amount and date in question. If you call, you may be asked to send this information in writing within 10 business days.
2. The financial institution must promptly investigate an error and resolve it within 45 days. However, if the financial institution takes longer than 10 business days to complete its investigation, generally it must put back into your account the amount in question while it finishes the investigation. Note: The time periods are longer for point-of-service debit card transactions and for any EFT transaction initiated outside the United States. In the meantime, you will have full use of the funds in question.
3. The financial institution must notify you of the results of its investigation. If there was an error, the institution must correct it promptly-for example, by making a re-credit final. If it finds no error, the financial institution must explain in writing why it believes no error occurred and let you know that it has deducted any amount re-credited during the investigation. You may ask for copies of documents relied on in the investigation.

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What happens if my ATM card is lost or stolen?

It’s important to be aware of the potential risk in using an ATM or other Electronic Funds Transfer card. Note that the risks differ from those involved with credit cards. On lost or stolen credit cards, your loss is limited to $50 per card. On an EFT card, your liability for an unauthorized withdrawal can vary:

• Your loss is limited to $50 if you notify the financial institution within two business days after learning of loss or theft of your card or code.
• But you could lose as much as $500 if you do not tell the card issuer within two business days after learning of the loss or theft.

If you do not report an unauthorized transfer that appears on your statement within 60 days after the statement is mailed to you, you risk unlimited loss on transfers made after the 60-day period. That means you could lose all the money in your account plus your maximum overdraft line of credit.

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Will I be able to use my ATM card overseas?

There are now hundreds of thousands of ATMs in more than 100 countries in both major cities and more remote locations such as villages in the Peruvian Andes. Before you go however, check with your financial institution to be sure there is an ATM at your destination, especially in a developing country. You can also check online. Both Visa and Master Card have online services to pinpoint ATMs anywhere in the world.

ATM cards can be very useful to travelers. They are safer than carrying cash because card issuers often will absorb any unauthorized withdrawals if you report your card stolen or missing right away. You can withdraw cash in local currency at a better exchange rate than you can get with traveler’s checks. And you have access to money after hours or on weekends when banks are closed. The down side is that the fees banks charge on ATM transactions may make it expensive to change small amounts of money. You also may be in trouble if the stripe on your card is demagnetized. To protect yourself use your ATM card in combination with credit cards and traveler’s checks.

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How will I know a pre-authorized credit (such as automatic payroll deposit) has been made?

There are various ways you may be notified. Notice may be given by your employer (or whoever is sending the funds) that the deposit has been sent to your financial institution. Otherwise, a financial institution may provide notice when it has received the credit or will send you a notice only when it has not received the funds. Financial institutions also have the option of giving you a telephone number you can call to check on a pre-authorized credit.

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How do I stop a pre-authorized payment?

You may stop any pre-authorized payment by calling or writing the financial institution, so that your order is received at least three business days before the payment date. Written confirmation of a telephone notice to stop payment may be required.

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How do I protect my ATM and Debit Cards against fraud?

1. Carry only those cards that you anticipate you’ll need.

2. Don’t carry your PIN in your wallet or purse or write it on your ATM or debit card.

3. Never write your PIN on the outside of a deposit slip, an envelope, or other papers that could be easily lost or seen.

4. Carefully check ATM or debit card transactions before you enter the PIN or before you sign the receipt; the funds for this item will be fairly quickly transferred out of your checking or other deposit account.

5. Periodically check your account activity. This is particularly important if you bank online. Compare the current balance and recent withdrawals or transfers to those you’ve recorded, including your current ATM and debit card withdrawals and purchases and your recent checks. If you notice transactions you didn’t make, or if your balance has dropped suddenly without activity by you, immediately report the problem to your card issuer. Someone may have co-opted your account information to commit fraud.

6. Open monthly statements promptly and compare them with your receipts. Report mistakes or discrepancies as soon as possible to the special address listed on your statement for inquiries. Under the FCBA (credit cards) and the EFTA (ATM or debit cards), the card issuer must investigate errors reported to them within 60 days of the date your statement was mailed to you.

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