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Video: Debit Card or eCheck: How to choose?

My Financial Minute

Transcript: Debit card or eCheck: How to choose?

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Debit card or eCheck?

Whether paying a bill online or setting up a recurring payment such as a gym membership, there are so many ways to pay for things today. Should you provide a debit card number or a bank account and routing number? And what should you keep in mind if you are setting up a one-time or recurring payment? How do you decide?

When you use a debit card for a one-time payment, the merchant requests approval from the bank to determine whether the account has enough money. If there isn't enough money in the account for the transaction, the bank will follow your overdraft preferences to determine whether to approve or decline the transaction. If you've told the merchant to use your debit card to pay your bills on a recurring basis, for example monthly, the bank may approve the transaction into overdraft and an overdraft fee will apply. If approved, a debit card transaction will be included as a pending withdrawal, reducing your available balance. This may help you keep track of the payment and avoid overspending.

Some merchants allow you to provide an account number and bank routing number for one-time or recurring payments. This is called an eCheck or sometimes called automatic ACH payments. With an eCheck, the transaction is not sent to the bank for approval prior to making the payment. Instead, the merchant sends the transaction to the bank later, sometimes as many as one or two days after you make the payment.

eChecks or automatic ACH payments will not appear as a pending withdrawal and will not reduce your available balance until the bank receives the transaction from the merchant. If the account doesn't have enough money to cover the transaction when the bank receives it for payment, it may be paid into overdraft or returned unpaid. If the transaction is paid into overdraft or returned unpaid, the bank may assess a fee. The merchant may also charge a returned payment and/or late fee.

So, here's what to think about when choosing a payment method.

First, if you've set up a recurring automatic payment, whether it's by debit card or eCheck, you need to keep track of your available balance to make sure you have enough money in your account on the payment due date.

Debit Card transactions will give you more control for one-time payments. The merchant can get approval at the time of the transaction, so you know your payment will be made. In addition, a pending transaction will appear on your account to help you keep track of your available balance.

With eCheck transactions, the merchant does not get approval prior to sending the payment to the bank, so it's important for you to keep track to make sure you have enough money in your account and avoid overspending.

Whichever payment method you use, remember that future scheduled or outstanding payments and checks are not reflected in your current available balance.

Keeping track of all your purchases is the best way to avoid overspending.

Still have questions about your payment options? Stop by your local Wells Fargo branch for a conversation with your neighborhood banker.

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