Antiquated payment systems are a major reason why Americans pay billions of dollars in overdraft charges and late fees, the most vulnerable people turn to high-cost payday loans to bridge cash flow gaps, and some leave the banking system altogether because of high, unpredictable fees.

It doesn’t have to be this way. Many other countries have real-time payments that clear almost instantly. Federal regulators urged U.S. banks to update their payment systems, but the banking industry has balked.

Finally, after years of nagging, the Federal Reserve announced in August it is developing its own service, FedNow, that will allow all U.S. banks to offer real-time payments. Big banks, predictably, aren’t happy.

That’s because the largest banks have already created a real-time payment system through a payment-processing company they own called the Clearing House. The big banks have yet to convince a critical mass of other institutions to make the investments required to connect to it, however.

Meanwhile, a bunch of person-to-person payment systems — PayPal, Venmo, Square Cash, Zelle and so on — promise to move money more quickly between individuals. Many require both parties to have an account, and the cash can sometimes take days to transfer.

The current landscape underscores why the Federal Reserve needed to step in, says Lauren Saunders, associate director for the National Consumer Law Center.

“It’s just really important that a public entity that answers to everybody, and not just the biggest banks, have a strong role in making sure that the payments work for everybody,” Saunders said.

Unfortunately, this transformation won’t happen overnight, even though we’re already decades behind some countries. The Fed is shooting for implementation by 2024. In the meantime, here are some steps that could help you minimize the cost of slow payments:

• Try to keep a cushion in your checking account. Even an extra $100 can help avoid overdrafts.

• Have access to credit. Getting a cash advance from a credit card is ultimately a lot cheaper than a payday loan.

• Decline the bank’s “courtesy overdraft” coverage. This coverage is an expensive option that can trigger multiple $35 fees. Opting out means ATM and debit card transactions that exceed your balance will be declined.

• Track transactions, set up alerts and create reminders. You can use a budget app to download and monitor bank account transactions, or check your accounts frequently online. Such vigilance is a hassle, but can save a lot of money while we wait for real-time payments to arrive.


Liz Weston is a writer at NerdWallet. E-mail: Twitter: @lizweston.