Like most people, I rely on the wonders of banking technology to receive my pay checks and pay my bills. Banks offer the near magical feature of having money just appear in your bank account (i.e. direct deposit) or having bills paid on a schedule while you worry about other things.
Modern technology is often so seamless and convenient that it’s easy to forget that both computers, and the people using them, are not perfect. It would be nice to think that our banking system is failsafe. However, that would be ignorant, and, in the case of finances, ignorance is far from bliss.
Here are four real life examples of banking disasters that could have happened to anyone, even you.
1. Direct Deposit Fail
One day I received an email from my company’s accounting department that read as follows:
“It has come to our notice that the funds were not deposited in the employee accounts on time due to a change in our payroll processing company’s process. This may have caused inconvenience to all of you. My apologies for this.”
My heart immediately started racing. What about my mortgage payment? What about my bills? Am I bouncing checks all over town?
My employer is a reliable and stable small business. They use a huge, well known company for their payroll processing, yet clearly these kinds of mistakes can and do happen. Fortunately, I was able to move some funds around to cover the shortfall before it was too late, averting any further crisis.
Any time you grant an institution access to deposit or withdraw funds directly to your bank account, you need to make sure you have a back up plan (i.e. emergency fund). These systems are far from foolproof.
As a result of this experience, I never rely completely on my direct deposit to happen as scheduled. I always have some liquid-able funds available that I can access in a pinch.
2. Bill Pay Gets Pushed Up
Imanuel relies on an electronic bill payment system from his bank to pay his mortgage. Since the payment is due on the 30th, and his bank is open seven days a week, he feels safe in the belief that his mortgage payment would always be drafted from his account on the 30th.
His bank had other ideas, however. Apparently their computers did not plan on showing up for work last Sunday, which happened to be the 30th. Imagine Imanuel’s surprise when he received an email notifying him that his mortgage payment had been drafted from his account on Friday the 28th. Because he had been expecting to make a deposit on the 29th to cover his mortgage payment, he was forced into a mad scramble to find funds to deposit by close of business Friday in order to meet all of his expenses.
Banks have their own way of calculating payment dates when you set up automatic payments. They will typically withdraw the funds on the last business day before the payment is due. In this instance, the payment was scheduled for a day when the bank happened to be closed. The next time it could occur on a bank holiday such as President’s Day or Columbus Day.
Since this changes month to month, you have to be very careful to log in to your account regularly and learn when each scheduled payment will actually be withdrawn.
3. Transaction Error
Jessica stopped in for a quick lunch at Wendy’s one day. She used her debit card to pay for her meal. When the cashier ran her debit card through the machine, he failed to press the decimal key when entering the total. The result was an immediate $700 debit from her bank account. The cashier noticed the problem, and appeared to void and re-run the transaction.
As you might have guessed, that didn’t work according to plan either. Only later did Jessica realize that both the original charge and the second charge were debited from her account. With her bank account now in overdraft, she began the lengthy and tiring process of requesting that her bank perform an investigation. Unlike a credit card chargeback, reversing an erroneous debit transaction can take over a week.
Even though you can’t borrow money with debit cards, they still must be used with extreme caution. Debit card transactions, right or wrong, will immediately remove funds from your bank account. Getting the money back is a difficult and time consuming process. Pay close attention to your transactions. Should an error occur, ask that a manager check to make sure the transaction was voided correctly and obtain a receipt for the void as well as the original charge.
If you suspect that you have been accidentally overcharged or are a victim of card skimming fraud, you must immediately contact your bank. Remember that you may not be reimbursed for several days.
4. Bank Error in Their Favor
Sometimes, technology isn’t at the root of a banking disaster. For example, James wrote a check to his lawn care company for $70.00. Like many of us, his handwriting isn’t the best. The bank failed to notice the decimal point when his check was cashed and $7,000 disappeared from his account.
While it was pretty easy to figure out what had gone wrong, the banks didn’t seem to be in much of a hurry to solve the problem. His bank had to contact the other bank and start an investigation. Eventually everyone realized the source of the mistake and the difference was restored to James’ account, but only after several agonizing days had passed.
Ever since James told me this story, it has crossed my mind every time I write a check. I now write out each check slowly and carefully. If you ever see a check that I have written, you will notice that each decimal point is more like the bubble on a standardized test than a stray mark.
Our modern banking system is a wonderful thing that works with nearly 100% accuracy. Nevertheless, it can fall short due to both technical and human errors. Ultimately, the only person completely responsible for your money is you. By being aware of how the system can fail, you can take steps to minimize the chance of a problem and its impact on your life.
Have you ever fallen victim to a banking disaster? How was it resolved? Please share your experiences and advice in the comments below.