An end to overdraft fees? Feds look into real-time payments


If you’ve ever deposited a check into your account but had to wait for the funds to become available while waiting to see if another payment you made would send you into a negative balance, you know that it can be an agonizing time. Now, the government seems determined to make real-time payments a thing.

Real-time payments, deposits could be headed to your phone

A viable and universal real-time payment system could save people a ton of money: Millions of Americans spend billions of dollars a year in overdraft fees.

The program would include a way to instantly pay a person over the phone as well as deposit money into their account. It would also cut down on users’ credit risks, as it would force banks to apply safeguards outside of business hours to ensure the speed and accessibility of the transactions.

Federal Reserve members said that the real-time money transactions would allow the United States to catch up with other countries who already have the infrastructure in place. The government said that the only way real-time payments can happen is for all financial entities to get on the same page.

“Consumers and businesses increasingly expect to be able to send and immediately receive payments at any time of the day, any day of the year,” Federal Reserve Board Governor Lael Brainard said in a written comment. “A 24/7 economy with 24/7 real-time payments needs 24/7 real-time settlement. That is where we believe that the Federal Reserve and the private sector together need to make investments for the future.”

A nationwide real-time payment system would also encourage more banks to develop faster money processing services, which would in turn create more choices for consumers and businesses.

3 ways real-time payments could help consumers

  • It could protect consumers: Many people look outside of banks at establishments that are under the radar and not beholden to banking rules for instant cash. The new real-time payments system could help bring order and stifle non-bank entities.
  • Instant payments could literally keep the lights on: When it comes to making utility payments, homeowners and landlords up against a payment deadline would be able to instantly pay their bills and avoid the agonizing time it takes for a check or payment to post, even on the weekend.
  • Quicker fraud prevention: Obviously, speedier payments would need to be combined with a faster way to detect fraud. A more robust and nimble system would be a necessity for any real-time payments system. Again, this is a win for consumers.

Do you support real-time payments? The Federal Reserve Board is inviting public comment on how it could make faster payments a reality for Americans.

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