This week's Coast Guard pay fiasco has reaffirmed my opinion about the timing of direct withdrawals. If you keep your bank account balances low, please do not schedule your automatic withdrawals to come out on payday. Set the for a day or two after payday. We have all been very blessed that military paychecks tend to come on time, every time. However, no system is perfect. The situation with Coast Guard pay this week has been an unpleasant reminder that things do happen.
Not only can there by systemic problems with pay, but there could be individual problems with a particular bank, or a particular account. Also, finance has been known to make mistakes - I have a friend whose husband did not get paid for several months during an overseas PCS move. Can you imagine?
There are four ways that you can safeguard against problems with automatic withdrawals that are set to paycheck deposits. First, allow a few days between the day that pay is scheduled to be deposited and the withdrawal is scheduled to be debited. Second, set up overdraft protection on your accounts. Third, keep an eye on your pay. Fourth, keep emergency funds accessible so that you can cover those bills if your pay is not deposited.
Direct deposit and automatic withdrawals are great tools in smooth financial management, but they do require you to make sure they are working as planned. Taking the four steps above will help avoid any surprises in the automatic withdrawal world.