As one of the most convenient ways to pay bills and receive paychecks, the automatic funds transfer is a financial transaction that ensures funds are sent and received on schedule without the need for human intervention. Here are some examples of how an automatic funds transfer functions, and why the option is such a valuable tool.
Transferring funds was once a practice that could only be done manually. Even in the early days of computer technology, a funds transfer had to be initiated by an authorized individual within a financial institution, and also received and posted at the receiving end. While manual funds transfers do still occur, it is not possible to set up scheduled or recurring automatic funds transfers to handle a number of situations. One of the most common applications of automatic funds transfer activity has to do with the household accounts.
Today, it is possible to set up monthly standing payments to utility providers, including Internet services and cellular phone providers. With proper authorization by the owner of the account, the utility company automatically generates an electronic invoice to a checking or similar account. The funds are automatically removed from the authorized account on the same day of each month and automatically forwarded to the utility service. No human hands are involved in the process once the standing authorization is put into place.
In like manner, automatics funds transfers can also be used to receive payments as well. Many companies today take advantage of the opportunity to pay employees using an automatic funds transfer. All that is required is for the employer to enter the banking information for each employee, set up the payroll profile to include the data needed to calculate the payment. Once in place, the transfer is automatically conducted, based on the protocols set within the payroll system. Employees do not have to find time to deposit a payroll check, nor do they have to wait for the check to clear before having access to the funds. The automatic funds transfer is safe, easy, and quick.
An automatic funds transfer can be set up to occur on the same dates every month, such as on the first and fifteenth, or they can be established to occur on the same days of the month, such as the second and fourth Fridays. There are a number of advantages for the consumer when it comes to automatic funds transfers.
First, there is the convenience of not having to sit down and write out checks each month. Payments for the utility bills and the rent or mortgage are automatically deducted from the bank account. Second, receiving a payroll check by an automatic funds transfer is secure, does not require any action on the part of the employee, and is usually credited to the bank account on the same day it is received. Last, the use of automatic funds transfer technology helps to eliminate paperwork for both the service provider and the consumer. The combination of ease, convenience, and efficiency helps to make the concept of an automatic funds transfer more popular with each passing year.