Use ECS for payment: Should You?
One participant in one of my classes asked me does ECS stand for Easy Convenient Stupid method of payment? I did not know what he meant. Here is his story.
Normally people think it is convenient to use the ECS method of payment. Like always this is normally the case. This reader had used ECS for making payment for gas, electricity, telephone bills. It was very convenient till his house went for reconstruction. He sent a letter to Mahanagar Gas, Reliance energy etc. saying I do not wish to make payments for these services now so please stop debiting the account. However he did not send a copy of this letter to the bank. Both Mahanagar Gas and Reliance Energy were happily debiting his account without giving him any service! This was inspite of the fact that the society had written a letter to both the service providers.
However when he went to the bank, the bank said “ECS is something which we cannot stop, you will have to go to the service providers”. Funny you thought you could decide whether anybody could debit your bank account, did you? Welcome to banking 101!
So off he went to Mahanagar Gas who agreed to stop the ECS on the basis of an email, but Reliance Energy said “procedure for stopping the ECS is the same you need to give your identity proof (Oh My God, not again) one cancelled cheque, one letter, your birth certificate, caste certificate….
The simple thing is to pay in advance if you are travelling, but otherwise make a net / cheque drop box payment for your expenses. Our utility companies are not the most polite of companies nor are they well organised to act immediately. Or be so well organised that if you pay in advance for 4 months know surely that you will live in that address for atleast 4 months. So what if you die? Tell Yama (the Indian God of death)- please wait I have paid for these services in advance….so please take me with you after the deposit is exhausted….LOL.
There is actually a RBI circular which says that the bank branches cannot or SHOULD not insist on a letter from the institution…read it here
http://blog.investraction.com/2010/03/ecs-easy-convenient-stupid.html
Param Iyer
Very true indeed. The financial institutions have no clue who is their client that need to be served…
In the current scenario, the safest bet is services like visa-bill-pay where you can choose if/when/how to pay. Better yet prefer service provider that allows you to pay on their site itself.
I have another ECS horror story – ABN Amro bank debits money, credits it back & charges 250+tax for ECS return charges. All because Franklin Templeton processed the ECS debit, though it was not explicitly authorized by the bank. And we still need expensive research on why financial inclusion is so low!!!
Manish Chauhan
Good one ..
learned totally new thing today . I dont have ECS for any of my services (i pay my phone , cc etc every month through net banking) , But I was considering of doing so 🙂 .
But now I will not 🙂 , thanks to this article .. I will put a link right on my blog 🙂
manish
CA Sundar
Hi,
Very true. ECS is really convenient when things go right, if you need to make some change it is really tough. One of my friends had a big problem with reliance too.
Abhishek
On Contrast
I have ECS SIP In kotak mutual fund via ICICI bank and SBI MF via CitiBank.
I decided to stop SIP after 2 ECS, I even didn’t contacted AMC, just asked Bank over phone to cancel my ECS and it was all done.. I didn’t pay single penny for this cancellation.
Bindhu
I’ve opted for ECS only for SIPs. Bill payments are always done after receiving the bill as I don’t really trust these service providers. Staying in a rented house makes me extra cautious. After reading this post, I think it’s better that way. 🙂