Are EFTs Worth Swearing At?


CheckingSome people swear by them; others swear at them.  I am one of those people who swear at them. I hate customer service problems. I would rather get things done correctly the first time that I work with a client then have to constantly make corrections. I would rather be known for efficiency than for problems caused by someone else.

No!  I am not talking about those annoying politicians in D.C.  In this post I want to discuss something that you can control.   I want to talk about automatic bank drafts, EFTs (Electronic Fund Transfers) for insurance premiums.

Unfortunately, many of the insurance companies that I work with will only allow people to pay premiums through EFT if they want to pay their premiums monthly.  The days of being able to mail your premium in are slowly coming to a close.

Every Life insurance company that I work with only offers EFT to people who want to pay monthly.  Most, but not all, health insurance companies are following their lead.  It is almost to the point where you cannot pay for insurance on a monthly basis without using EFT.

Although EFTs are a necessary evil for insurance agents, I do not like them.  My problem is that both I and my clients are at the mercy of the insurance company and bank to communicate.  If one of them drops the ball, my client is justifiably upset and calls me.

In the past 5 years, over half of the customer service complaints that I have to deal with are because of EFT.  In this post I want to share a couple of tips for canceling an automatic bank draft that I have used to help clients.

THROUGH YOUR INSURANCE COMPANY

If you know far enough before your checking account will be drafted that you want to stop the draft, you can try contacting your insurance company and ask them to cancel your EFT arrangement so that your account is not drafted.

Just be aware that this technique is not immediate.  In many cases, you cannot call the insurance company the day before your draft is scheduled and expect your bank account to not be drafted.

Insurance companies notify banks of a draft in the same way they do with a paper check.  Your draft may already be in the banking system by the time you call your insurance company.

The good news is that in most cases, you are not totally screwed.  If you call your insurance company at the last minute and instruct them to stop your EFT, the draft may go through your bank but the insurance company will send you a refund check for the premium if that is what you want.

However, the insurance company will probably not reimburse you for any bank fees if the EFT causes your account to be over-drawn.

THROUGH YOUR BANK

I was born in 1960 B.C. (Before Computers).  My wife and I have raised two sons.   I have been forced to learn more about computers than I care.  That does not mean that I have blind trust in them.

In theory, computers are flawless but I have seen too many “computer errors” to place my unfaltering faith in a computer network.

The digital connection between an insurance company and a bank is pretty good.  However, it is not flawless.

Occasionally, a client tells me that they have tried to cancel an EFT directly with the insurance company but that attempt failed.  Their bank account is still being drafted.

When that happens, I advise them to call their bank and place a “Stop Payment” order on their checking account for that insurance company.

I also advise my clients to use this technique when they call me the day before a draft is scheduled to happen and it is too late to contact their insurance company.

If you elect to use this technique, be aware that many banks charge a fee for a “Stop Payment” order.  It is not free.

However, a $35 bank fee is much less expensive than the costs of multiple “bounced checks” if you forgot about an insurance premium that is scheduled to automatically be drafted from your account.

FINAL THOUGHT

There are both good and bad things about EFT arrangements.

An automatic bank draft arrangement can eliminate your need to remember to write and mail a check each month to prevent your insurance from lapsing.  If you have a hard time remembering to pay your bills in a timely manner, the EFT arrangement is a perfect option.

However, if you live from paycheck to paycheck and have no idea when you will get paid next, you may want to use a different method.

One technique that I advise to my clients who are considering setting up an automatic EFT plan to pay their premium is for them to get a second checking account that is only used for EFTs.  Many banks offer free checking accounts that you can use.

As long as you transfer your premium money to that account each month, you will have no “bounced checks” if you do not get paid in time.

This strategy does not eliminate your need to pay your premiums.  You will still need to manually transfer enough money to your EFT account each month.  It just gives you a little more control over your assets.

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