In our fast-paced financial world where everyone wants your money as fast as they can get their hands on it, how can you avoid getting caught in the current, floating towards disaster?
Float time is how long it takes a transaction to clear your checking account. Let’s say you deposit your paycheck into your account each month. Notice how the funds aren’t available for 3-4 days, or even longer? This is float time.

Although float is becoming close to non-existent, it can hurt you if you don’t stay on your toes with your expenses and payments. Gone are the days when you could pay your bills by check a few days before the due date and count on your incoming paycheck to cover it. This is especially risky if you are living paycheck to paycheck.

If you routinely rely on your paycheck to be credited to your account in time to pay your monthly bills, you may be in for a nasty shock. Banks and credit card companies make billions every year in fees due to people’s poor bill paying habits. Creditors are asking banks for their payments as fast as they can so they can use the money as soon as possible. You can better track your expenses and plan ahead to avoid hefty fees resulting from exceeding credit limits and paying bills late.

Why can banks clear payments from our accounts at such a fast rate? In 2003, the Check Clearing for the 21st Century Act (or Check 21) was passed by Congress, allowing banks to make a copy image of your physical check to speed up the processing time. This means your money stays in your account for a shorter amount of time and leaves as fast as possible, allowing creditors and banks to use your money as quickly and for as long as they can. Good business sense on their end, maybe not so good news for you. Thanks to Check 21, a payment generally clears your account in less than two days when the same transaction used to take about a week.

Enough about the problem. What is the solution?
How can you get your money faster and reduce the power banks and creditors have over your money?

1) Use direct deposit
Most businesses offer the option of having your paycheck deposited directly into your account. The money is deposited into your account usually by midnight of payday. A benefit of this option includes never seeing your paycheck, which reduces the temptation to cash it. If the money is already in the bank, you are more likely to allocate your funds appropriately and be more responsible with your money. (Sometimes you have to trick yourself into being smart!)

2) Do your banking online
It’s fast and easy, and saves you the time of opening bank statements in the mail. You’re being kind to the environment by cutting back on paper, and some banks even offer a higher interest rate for customers who cancel paper statements altogether in favor of online banking. You can view all your transactions on the computer and see copies of checks you have written. You can set up automatic bill pay to eliminate the worry of missing your due date and incurring fees. Another plus: making payments online is safer and more secure than using checks.

3) Set your own due date for bills
This is surprising to some, but many creditors are open to (and even encourage) customers setting their own due dates for bills. Taking advantage of this feature can greatly simplify your financial life. Wouldn’t it be easier to pay all your bills on the 1st of each month (your credit card(s), mortgage, even utility bills) rather than have multiple due dates? Another option could be spreading your bills throughout the month so you don’t have a big chunk of money deducted from your account at one time. Depending on your financial situation and personal preference, either of these options can put you in control.

Don’t play the game with banks and creditors if you don’t have to. Taking these steps will make your financial life a little easier and should save you a few headaches in the future.

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