Is it safe to schedule a payment on a pay day?

[StageLeft]

I've wondered this. If I have some money coming in and some money going out, what prevents the out money from leaving the account a couple of hours before the in money hits it, thus putting it negative? Because of this concern I've always scheduled payments a day after to confirst first that the money is in fact there. Is this effort necessary?

 

[Locut0s]

I would always do so yes.

 

[guyver01]

Originally posted by: Skoorb
I've always scheduled payments a day after to confirst first that the money is in fact there. Is this effort necessary?

That's exactly how i do it. What if your payroll deposit gets screwed up? You don't want any overdraft fees. If payroll screws up, you can always cancel the payment

 

[S Freud]

I'm with you OP. I always schedule a payment a day or two after the payroll deposit, this takes away concern of exactly what you're asking.

I would assume this is more of a problem for people who live paycheck to paycheck.

 

[Codewiz]

Banks process deposits first prior to paying out. So it should be safe as long as your company doesn't screw up the deposit.

 

[Paperdoc]

All the banks I've dealt with don't do these things hour by hour. Automatic debits and credits are sent to the bank's computer systems a little ahead of time (by a day or two) with a specified posting date. On that date (usually at the end of the computer's version of "business day" ALL of the pending items are posted and a final balance calculated. So your only real concern with banks that do this is whether your pay info actually will arrive in time to guarantee the money is there on the expected day. The actual time of day is not the issue. In my experience, my pay deposits always were posted to my account at the END of the PRIOR day (probably because of my employer's policies). For example, pay due on the 15th would show up in my account by 1 or 2 am on the 15th, but automatic payments (say, for a cable bill) payable on the 15th were posted at the end of the 15th, and would show up by 1 or 2 am on the 16th. I must agree there is a possibility that the employer's computers could fail (which is why they make earlier arrangements), but even worst case should allow them to get the info to the bank ON the deposit date, rather than one day or more ahead, and it still would be OK.

Debit card transactions are a little different because the bank will not dishonor a transaction they've already accepted. So the bank runs an invisible background process. When a transaction comes through from a merchant, the bank's computer checks your account to verify you have that money there, then sets up a kind of "reserve" on the account to note that a certain amount of money in the account actually is NOT available because it's committed to something. But the money is not actually removed from the account in a posting operation until the end of the day when all transactions are posted. At that time the reserve is canceled and the money moved out. It's a little weird because the result for you is the same - the money you just spent with a Debit Card purchase is not there any more right away, but the bank has some other security and checking systems tied to the end-of-day posting process.

 

[rh71]

what prevents it? Having a buffer in your account prevents it. How people go with little to no money - live on the edge - and not expect to be dinged is beyond me. In our joint account there's always a $200 buffer. Like you, I don't schedule anything to be taken out unless I'm sure that amount is already in there first. Planning... it's what's for dinner.

THere's also a free overdraft that we get once a year in that account. When the balance at the end of the day is negative we would get hit for $35 otherwise.

 

[TwiceOver]

Originally posted by: Codewiz
Banks process deposits first prior to paying out. So it should be safe as long as your company doesn't screw up the deposit.

Not entirely true. Some banks that are setup up specifically to screw people will post debits before credits.

Take TCF in Minnesota as an example of a bank that only has policies to hose the client. They process all daily debits before credits. So if you have a $500 credit and they process 3x $100 checks. The checks come before the credit and each is assessed an NSF fee.

Not to mention the ass rape when you don't use one of their ATMs. And if said ATM is out of state, expect to get gapped out.

 

[isekii]

Originally posted by: Codewiz
Banks process deposits first prior to paying out. So it should be safe as long as your company doesn't screw up the deposit.

Is this true for all banks ?
I wouldn't be surprised if they screwed you and hit you with a fee by doing the reverse putting you in the negatives if you're low on funds first.

 

[IceBergSLiM]

Im a risk taker and always for years now have scheduled transfers for same day as DD. Never failed.

 

[dullard]

I think you are just playing with fire. Sure, it can work for years, but as others have said, one screwup with your deposit and you are up a creek with no way of knowing or time to fix it. If you schedule it the next day, then you can always scrounge up some cash (friends/relatives/etc) and deposit it the next day if you see there is an error in time to pay your bill.

I personally think people need a small buffer anyways. For me, I keep $100 in checking more than I ever need. True, mathematically I should invest that. But even if I could get a 10% return on my stocks, that $100 buffer only costs me 83 cents a month. If I royally screw up or if my bank/employer royaly screws up, that $100 will cover most bills (electricity, gas, water, insurance, student loan, garbage, etc are almost always under that $100 a month for me). If everyone set this buffer up, they'd all save a LOT of headaches, and the question of yours would be nearly irrelevant.

Also, a majority of companies are flexible with due dates. I have set almost all of my bills (utilities and credit cards) to be due 10 days after my paycheck is deposited. Only two companies refused to change the due date for me and one of those was due 15 days after my paycheck and it wasn't worth fighting to move it just 5 days. That 10 days gives me a few days buffer after my paycheck is depostited and a few days buffer to make certain that my bill payment went through. On either side, I have time to fix any problems.

 

[rh71]

Originally posted by: dullard
True, mathematically I should invest that. But even if I could get a 10% return on my stocks, that $100 buffer only costs me 83 cents a month.

This isn't fatwallet forums and people here undoubtedly drop $60 on a game or $7 on cigs or beer on a whim so that really isn't necessary around here.

 

[udonoogen]

i have a two week buffer. not risking it.

 

[hiromizu]

err..just make sure you have enough cash to cover some overlap expenses and you're gold...or just do the smart thing and schedule your payments a week after.

 

[alkemyst]

Depends on bank, but I believe almost all balance out at midnight of the day of transactions.

However; payroll checks occasionally get delayed. It's less important if you have a decent balance, but if you live check to check and have 10+ items coming out on a day that could be several hundred in overdraft fees.

 

[SonnyDaze]

I have a situation like that. I have a direct deposit that goes to a specific account for a specific payment. The deposit always occurs on the first of the month but I have the payment set up to go out on the 5th. It gives me a couple days leeway for an oopsy by the bank but I still leave a buffer in there too.

 

[2Xtreme21]

I have a loan for my car through my company's credit union, so I divert the cost of each payment to a savings account each paycheck, and they take it directly out of there. If somehow my company were to screw up and deposit late, I wouldn't be held liable, since it's essentially my company paying itself through my paycheck. Most efficient thing I've seen in a while.

 

[theknight571]

I don't know how most banks work... but mine seems to like to process withdrawals first... I've learned to schedule payments at least one day after payday or risk paying the overdraft fees over and over again.

 

[Baked]

I pay my bills manually on the same day every month. Well, except when I was financing my car.

 

[StageLeft]

I keep a buffer in my account but not a mortgage payment worth.

Seems ultimately it's a bit risky to do it on the same day and varies by bank, thanks for the posts!

 

[oiprocs]

Originally posted by: Skoorb
I keep a buffer in my account but not a mortgage payment worth.

Seems ultimately it's a bit risky to do it on the same day and varies by bank, thanks for the posts!

I keep a timewarper handy at all times.

 

[EagleKeeper]

Originally posted by: Skoorb
I keep a buffer in my account but not a mortgage payment worth.

Seems ultimately it's a bit risky to do it on the same day and varies by bank, thanks for the posts!

Check with your bank. Most banks settle up at the end of the night. If the deposit is in to cover the withdrawls, you are safe (depending on the deposit hold rules) EFT should not be held.

Now when the deposits do not cover the withdrawls, then you can get royally screwed depending on how the banks orders the withdrawls. If the large amounts get covered first, then you could have multiple small ones, each creating a OD fee.
If the bank uses the FIFO, then it is a matter of timing. If the bank used the smallest ones first, you can get hit with less OD fees, but run the risk of a critical large payment being rejected.

 

[PepePeru]

Originally posted by: isekii

Originally posted by: Codewiz
Banks process deposits first prior to paying out. So it should be safe as long as your company doesn't screw up the deposit.

Is this true for all banks ?
I wouldn't be surprised if they screwed you and hit you with a fee by doing the reverse putting you in the negatives if you're low on funds first.

some banks do this...

 

[HardcoreRobot]

i do same day just to stay organized, but i keep a buffer big enough to handle a late or missed paycheck (but thats never happened)

 

[Oakenfold]

Originally posted by: Codewiz
Banks process deposits first prior to paying out. So it should be safe as long as your company doesn't screw up the deposit.

The OP should check with the bank, I believe this is an option that is up to the financial institution. I'm not aware of state (i.e. at least Florida) / federal law that requires which transactions clear first, also don't attempt to schedule debits based on which transactions your institution clears first because they do change the order of transaction posting from time to time.

@ OP, always schedule any debits that you will not have funds to clear after your direct deposit goes in. If possible establish a line of credit or establish a cushion for your own protection as it's really not worth the potential headache. The loss of interest on the cushion is nominal compared to returned item and overdraft fees.