How it works and what your business can gain from it.
An eCheck, or electronic check, is a type of electronic funds transfer from one bank account to another. It has the same components as a paper check, but in digital form. To initiate an eCheck payment, a customer provides an amount, bank account number and routing number to a merchant in person, through an online payment form or over the phone. Phone payments can be manually entered into a virtual terminal. The eCheck amount is electronically debited from the payer’s account, moved through the Federal Reserve Bank’s Automated Clearing House (ACH) and credited into the receiver’s account.
Can Paper Checks be Processed as eChecks?
An eCheck can originate from a paper check. The merchant scans it through an image capturing device (electronic check conversion) and, as mandated by the Electronic Funds Transfer Act, notifies the customer of the consequently faster processing time. After electronic check conversion, the physical check is voided and returned to the customer along with a receipt.
eChecks Offer Many Benefits Over Their Paper Counterparts:
- save the time it takes to go to the bank and prepare deposit slips
- cut out the risk of losing a physical check
- faster to process, and secured by the same reliable ACH
- cheaper to process because they remove paper, mailing and administrative costs
- promote on-time payments from customers since they can be used for online and phone payments
- convenient to automate for recurring payment schedules
eChecks vs. Card Payments
When a card-issuing bank authorizes a debit or credit card transaction, the bank assumes liability for providing funds for the transaction and usually places daily spending limits on debit and credit cards as a result. eCheck payments, on the other hand, are the sole responsibility of the check writer. They are only restricted by the amount of funds in the individual’s bank, making them popular for large consumer payments, such as mortgages and loans, as well as business-to-business (B2B) transactions.
Card payments are processed in real time and instantaneously deducted from a cardholder’s account. eChecks are processed after a transaction is made and take a period of time to clear, usually one to four business days. Their transaction rates are lower, and they're common for recurring service payments because a business can wait to provide services until the check has cleared. Online service providers and property managers collecting rent are common examples of eChecks in action. Offering an eCheck payment option is another way for a business to broaden its customer base, especially online. All the customer needs is a bank account to make a payment, rather than a debit or credit card. With a merchant account from BankCard USA, your business is equipped to process all forms of electronic payments, including eChecks.