Ever notice that box on your monthly bills that you can check to “simplify your life and save the costs of stamps and envelopes” by making your payments automatic? The suggested options are likely to include either posting the bill to your credit card for later payment or making a direct transfer from your checking account to the company.

This latter option is an example of an electronic funds transfer or EFT. Under the Electronic Funds Transfer Act of 1978, Congress laid out rules for non-check payments. EFT or non-check payments include:

•  ATM transactions.
• Debit card payments (also known as point-of-sale or “P.O.S.” transactions on your monthly bank statement).
• Preauthorized transfers (as in direct deposits of a paycheck in your bank account—or a monthly payment from your account).
• Telephone transfers (as when you want to transfer funds from one account to another or you forget to pay a bill and need to get it done at the last minute).

So even before Internet banking, we have had alternatives to paper checks for making payments for such services as cable-TV and car-insurance. But what are your rights and protections if something goes wrong?

The short answer is, EFT payments are not as secure as your credit-card payments.

"Q: I bank online. Last month, instead of my regular payment of $82 to Time Warner Cable, Bank of America transferred $8,200! The bank said I would have to get the money back from Time Warner. Despite many calls and hours in line, I’ve gotten nowhere. Now, I have no money. Can you help? —Melodie Marks, Westminster, California"

So somewhere along the line, a payment amount was subjected to a shift rightward of two decimal points.  Suddenly in the automated convenience of it all, a payment for $82 morphed into a withdrawal from her checking account in the amount of $8,200. How big was the overcharge?.

$8,200 - $82 = $8,118

If something like that happened to you, what recourse would you have? The answer Ms. Marks came up with was to turn to Ron Burley, who writes the "On Your Side" column for the magazine. He then took on her cause and talked to both Time-Warner and the Bank of America. After some further foot-dragging on Time-Warner’s part, the matter was cleared up, without penalties in any direction.

This outcome can be viewed as either a victory or a warning: Should it really take a representative as powerful as AARP to get such a simple mistake corrected?  

By contrast, if the overcharge had occurred on a credit card, it would have been much easier for the consumer to straighten things out. Why? Under a series of consumer protection laws dating back to the Truth in Lending law of 1968, Congress has required credit card companies to set up departments to mediate between consumers and companies regarding payment errors. When circumstances warrant, the credit card issuers can then hold up payments to the billing companies until the matter is resolved. (For more on how to dispute a credit card bill, see the Federal Trade Commission's website.)

With EFTs, on the other hand, the consumer's rights and recourses are less clear. The AARP’s article suggests a number of safeguards.  

• Don’t press the send button until you look at the amounts being transferred, if you have the option. 
• Don’t forget to sign off on a public computer, if you are managing your accounts on one. 
• Take a look later to see how the transactions were actually entered, accurately or otherwise. 
• Hold tight to your passwords and PIN numbers.

The Federal Reserve also offers "5 Tips for Protecting Your Checking Account." Beyond the pointers just mentioned, the Fed suggests notifying your bank about any possible errors ASAP, and avoiding overdrafts.

In the meantime, the bottom line is that credit card payments offer you more back-up than EFTs.  

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