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Debit cards represent a quite useful mean of electronic payment due to the fact that they permit a swift transfer of funds between buyer and seller. There is no need for the seller to be concerned about a bounced check. The debit might be of more convenience to the buyer than writing a check, and it is also more secure than carrying cash. There are consumers who also vote for debit. This is due to the fact that they consider the limitation by the amount of money, stored on their account, as a good means of managing their spending.

This technology received great support from the government. Currently a lot of state and federal benefits, including Social Security and food stamps, are transferred electronically. The distribution of benefits via electronic means is advantageous for the government and for the recipients. Electronic transfer is much cheaper that paper checks and in addition it also reduces fraud.

Direct Deposit and Automatic Bill Payment

Direct deposit and automatic bill payment represent the two means of electronic payment that are typically cleared with the help of Automated Clearing Houses (ACH). The latter are managed by the Federal Reserve System or a private provider. Direct deposits represent increases in consumer's account. Contrasting ATM and transactions using debit card, automatic bill payments represent automated debits or simply reductions.

Most often direct deposits are used by employers, government agencies, as well as other organizations that participate in regular payments, including wages and dividends, to individuals. The data provided by the National Automated Clearing House Association (NACHA) states that about 68% of households from the United States receive their wages through direct deposit.

The biggest user of direct deposits is the government of the United States. About 98% of all government workers apply to direct deposit. In addition most of the government's benefits are paid through electronic means. About 37 million recipients get their monthly payments from the Social Security Administration, which uses direct deposits.

Getting payments by direct deposits is easy. The first step a consumer should make is to authorize the deposit. Afterwards the party that makes the payments generates an electronic message that denotes the amount of the payment and recognizes the financial institution as well as the account that is to be credited. This information is then sent by the financial institution of the employer to Automated Clearing House. The latter gathers and sorts the collected data. Afterwards ACH sends the information regarding the account and payment to the financial institution, which, in turn, credits the consumer's account.

The same system is applied in automated bill payments. The system, however, is used in reverse and namely: in the payment's arrangement consumer authorizes the biller, which can be a utility company, in order to subtract funds automatically from the consumer's account for the usual bill payment. Generally the automated bill of payment can also be referred to as direct debit.

First of all the consumers enters the automatic payment program of the biller. This is usually performed by filling a form that can be found on biller's website. The form points out the time of the payment, the exact amount of money or the balance due, as well as the account from which the payments will be extracted. Afterwards this form is transferred to the biller. The biller then makes arrangements with the financial institution of the consumer.

Before subtracting the payment from account, the consumer receives a payment notification from the biller. In most cases this is performed a week or two in advance. Then the notification is itemized. After analyzing the charges, consumer has the right to contact the biller in case an error has occurred. By consumer's wish the electronic payment can be stopped. This is in case the consumer notifies the creditor, as well as the financial institution.