OT: totally random financial security question

[AngryScientist]

i'm a Luddite and pay many of my bills with a check in the mail still.

one thing has always bothered me:

seems all one needs to sign up for auto billpay or other electronic retractions from a bank account is a routing number, account number and full name.

all of these things appear on a standard check that we generally provide to complete strangers to pay for things....

why is there not more fraud associated with what seems like a wide open security loophole?

am i missing something ?

there, that is my stupid question for friday.

[Irishgirl]

And to think our Social Security number use to be on our drivers license.


You make an excellent point.


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[pdmtong]

the routing number and the account number act like signage directing you to or from the city you want to travel to. but to get on the road, you still need access to that highway system. and that access is what stands in the way of fraud.

in the beginning, yes, everyone paid in person or mailed a check via stamped usps envelope. then each vendor asked you to set up an individual account with them to pay bills. now, each bank had the ability to do bill pay to any number of vendors and individuals that you set up. so all you do is log in to your online bank (phone or computer) and pay away.

the best thing about taking the time to do this? no more stamps. no more checks.

to set up the pay to account you will probably need the zip code and phone for each payee. so just do that one by one as you get bills to pay, not all at once. since more and more vendors are now part of a central list, there is probably less need to type in a lot of details - exceptions would be individual service providers like a local dentist.

are you at least depositing your checks using your phone? not at an ATM?

[MattTuck]

I don't really like the idea of giving my banking information out to companies. If for no other reason than, if they get hacked or make an erroneous withdrawal, it could negatively impact me.

There is a bank called Simple, that offers very low fee, no frills accounts, that some people use as an intermediary between their main checking account, and the account given to your electric company, cable provider, etc. Prevents them from taking more than what is in the account (ie. not allowed to overdraft).

If I had more time on my hands, I'd probably set up such a system.

[jmoore]

Originally Posted by AngryScientist

why is there not more fraud associated with what seems like a wide open security loophole?

am i missing something ?

Yes you are missing the multi-factor authentication that verifies the banking info and that the requester is the owner of the account. There are many ways that a bank can verify a requester is an account owner. Each bank likely does it slightly differently but, to be sure, it's happening.

Banks are highly regulated and there is a HUGE emphasis on security that they have thought through every fraud scenario we can all think of, and then 1000 more, and have coded for it. It is in their fiduciary interest to verify the requester is the owner, so they go to great pains to do just that. Often the backend systems are sophisticated enough to handle all this in the back end with little to no input from the customer.

[NYCfixie]

Originally Posted by AngryScientist

i'm a Luddite and pay many of my bills with a check in the mail still.

one thing has always bothered me:

seems all one needs to sign up for auto billpay or other electronic retractions from a bank account is a routing number, account number and full name.

all of these things appear on a standard check that we generally provide to complete strangers to pay for things....

why is there not more fraud associated with what seems like a wide open security loophole?

am i missing something ?

there, that is my stupid question for friday.

Banks protect you in the case of fraud. And, much like Amazon tracking everything you do, so do banks and credit card companies to make sure the transactions are legitimate (it's all algorithms these days). You can send electronic payments from your bank rather than pull them from your payees if that makes you more comfortable. That is what I do and it takes so much less time to log into my bank and pay several bills electronically rather than log into each payee and make the payments. I probably moved to e-paying my bills much later than most but I will never go back to dealing with paper checks again.


And, even with all the news about cyber-attacks/hacks, you are more likely to have your identity stolen these days via sending checks in the mail than you are by sending encrypted e-payments.

(so says the person with a CISSP and CISM)

[gasman]

Doesn't your bank offer a bill pay system ? My credit union has one that I use for almost all my bills. I just keep a list of payee's then I'm able to enter the amount to be paid and the date the electronic funds are to be sent. A decade ago there were one or two companies that were small and not set up to have electronic payments but thats not an issue these days.
I still write maybe two checks a month for very small businesses.

[rwsaunders]

Originally Posted by AngryScientist

why is there not more fraud associated with what seems like a wide open security loophole?

There certainly is fraud with checking accounts but using a personal check is a slower process than using a credit card and personal checks (US based) aren't routinely used for payments for goods in foreign countries. Checks also typically require a signature on both the payee and receiver end where the card doesn't and a check typically needs to be deposited somewhere before one can use the funds. Gift card fraud is a biggie these days...steal your credit card info to purchase a gift card to purchase electronics. Extremely hard to trace once the gift card has been used.

[yngpunk]

Originally Posted by MattTuck

I don't really like the idea of giving my banking information out to companies. If for no other reason than, if they get hacked or make an erroneous withdrawal, it could negatively impact me.

There is a bank called Simple, that offers very low fee, no frills accounts, that some people use as an intermediary between their main checking account, and the account given to your electric company, cable provider, etc. Prevents them from taking more than what is in the account (ie. not allowed to overdraft).

If I had more time on my hands, I'd probably set up such a system.

Smart idea. Should also link your paypal account to such an account as well and make it a practice to move money out of such an account once the balance reaches a certain level. Should prevent paypal for seizing funds in case of dispute...no funds to seize

[kppolich]

Someone once told me to setup all payments with a Credit card. That way, if fraud happens, the bad guys take the Credit Card's money and not your money like they would through a Check or Debit Card.

Credit Card companies will surely take care of their own money and try to get it back faster than it would take your bank to hunt down your missing $ from a debit account.

[Ralph]

I don't allow many companies to TAKE money automatically from our checking account. Electric and water is all I can think of. Visa bill every month we pay from our checking via electronic funds transfer. Everyone else....I pay via a bill pay service at our bank. Can't remember the last time I put a stamp on an envelop with a check in it. I think this is way safer than having checks work their way thru snail mail.

Move all monies back and forth from our investment accounts with electronic funds transfer. Same with Paypal. Even send my kids money with bill pay.

And I'm 77 years old......and my kids accuse me of being behind on this stuff. Can't believe you young whipper snappers are still mailing checks. LOL

[Ozz]

When you provide a company with your banking info to auto-debit your account, you are counting on that company to keep the info safe. There seems to be not a good track record of companies doing this....

There actually is lots of fraud associated with this, but in most cases consumer protection laws require banks to reimburse consumers for unauthorized transactions on their account. You see a transaction you did not authorize, your bank has you sign an affidavit of forgery or fraud, and you get your money back. The bank takes a hit, and eventually cost of the fraud is passed onto the bank customers. Cost of doing business.....

Better to sign up for the bill pay service via your bank. A lot of your larger billers are able to submit their customer bills electronically to this network and have them routed to your bank. You can then pay them without providing your banking info to the biller.

Or, have the biller debit your credit card...consumer protection helps here as well. You will just have to get a new credit card every year or so. I have a card I use just for online and auto-pay transactions.

[NYCfixie]

Originally Posted by kppolich

Someone once told me to setup all payments with a Credit card. That way, if fraud happens, the bad guys take the Credit Card's money and not your money like they would through a Check or Debit Card.

Credit Card companies will surely take care of their own money and try to get it back faster than it would take your bank to hunt down your missing $ from a debit account.

not true (see below)

Originally Posted by Ozz

When you provide a company with your banking info to auto-debit your account, you are counting on that company to keep the info safe. There seems to be not a good track record of companies doing this....

There actually is lots of fraud associated with this, but in most cases consumer protection laws require banks to reimburse consumers for unauthorized transactions on their account. You see a transaction you did not authorize, your bank has you sign an affidavit of forgery or fraud, and you get your money back. The bank takes a hit, and eventually cost of the fraud is passed onto the bank customers. Cost of doing business.....

Better to sign up for the bill pay service via your bank. A lot of your larger billers are able to submit their customer bills electronically to this network and have them routed to your bank. You can then pay them without providing your banking info to the biller.

Or, have the biller debit your credit card...consumer protection helps here as well. You will just have to get a new credit card every year or so. I have a card I use just for online and auto-pay transactions.

True - in the end, we all cover the cost of fraud one way or another.

[PaMtbRider]

As many others have said, use your Bank or credit union bill payer app. It is so much easier and quicker than a check and you still control when payment is made. You are also not providing 3rd party companies with your information.

As easy as this is, I am getting lazy and slowly allowing more monthly bills to be auto-drafted from our checking account. Mainly utilities that don't vary from month to month.

[mt2u77]

I auto-pay just about everything. Recurring bills I set notice limits above the expected amounts. A general notice limit sends me a text message whenever there is a draft or deposit above my daily fray. About the only thing I really hit send on manually is the CC bill.

With direct deposit and auto contributions to all investments, auto rebalancing etc., my menial financial life is practically on autopilot. I hate doing that stuff, so it’s a godsend for me.


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