Easy Guide on How to Run Your Bank Account – Part 2
While Part 1 of this guide series dealt with running a smooth bank account when it comes to receiving money, the following guide will cover the ways you can make payments from your bank accounts for expenses.
Debit Card
Generally, when you open a current account the bank or building society will supply you with a debit card, which allows you to both make cash withdrawals or pay for goods at shops and businesses. The funds will normally be deducted from your available balance immediately, although it may not be taken from your account until the next day. When paying with your debit card, you will need to authorise the payment by entering your personal identification number (PIN) – this method is now in the majority, whereas previously retailers would swipe the card and ask for a signature.
If they have reasonable grounds to do so, banks or building societies can block your debit card, making it non-operational for payments. They must contact you and tell you they intend to do this. Reasons for blocking your card include if they feel the security of your account has been compromised, it they suspect fraudulent use and if there is a major risk that you may not be able to repay your overdraft.
Cash Withdrawals
Cash withdrawals are easily done from bank or building society operated cash machines, at some supermarkets and from certain shops (known as cashback). With some current accounts, you can even withdraw cash at post office branches.
The money will be deducted from your account straight away and there is a limit to how much you can get at one time or in a day, depending on your bank. Also be aware that some ATM’s can charge a fee for a withdrawal, such as those operating at local shops.
Paying Bills
Apart from the above methods, you can conveniently pay your bills using the funds in your bank account in the following ways:
Internet or Phone
It’s crucial to provide the correct details when paying bills by internet banking or over the phone, including the payment reference number supplied on your bill.
Cheque
When using a cheque as payment, always clearly write the name of the person or company you are paying to prevent any confusion and ensure you draw a line through any blank spaces on the cheque so no-one can add extra numbers or names. Currently you can guarantee the amount of your cheque with a cheque guarantee card, but this will end after 30 June 2011.
Direct Debit
Setting up a direct debit allows a creditor to take payment from your bank account automatically and it can be arranged to pay for both fixed and variable bills. The Direct Debit Guarantee ensures that the bank will be liable if any errors occur. Direct debits can also sometimes earn you savings from suppliers.
Standing Order
This is an instruction to your bank to make regular payments to another account – you will simply tell them the amount you want to pay and on which date each month. This is a free service and can be cancelled whenever you ask your bank to do so.
Recurring Payments (Continuous Payment Authorities)
With this method, you can use a debit card to set up a Recurring Payment to allow a business to charge your card regularly. This is different from a Direct Debit on your current account, in that you will give the business your debit card number, rather than your account number and the sort code. There is no common set of rules for Recurring Payments, and the Direct Debit Guarantee does not apply to them – this means there’s no automatic right to ask your bank to stop the payments so it’s crucial you trust the business before allowing them to charge your card. If you want to cancel it at any time, it’s best to write to both the company and your bank to notify them
Faster Payments Service (FPS)
Some banks and building societies are now using the FPS for internet, phone or standing order payments. This means that payments can be made on the same day for standing orders and within two hours for phone or internet payments.
Conclusion
The above information clarifies the ins and outs of making payments from your bank accounts. The most important factor is to keep a vigilant eye on your balance to ensure you don’t go too far into the red. Also, keep your bank account running smoothly by asking your bank or building society how long it will take for payments made to creditors to arrive and what the window is for you to stop a payment from leaving your account if you change your mind.
About the Author: Sean Raston is an economics student and expert on personal bank accounts.
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