EFTs have become a popular mode of money transfer in the US because they are easy and don’t require very much bank employee intervention. As such, they have made paper checks all but obsolete, especially for businesses that can save time and money using EFTs.
Anyone with a bank account can send money, including businesses and individuals. EFTs require two parties: the person or entity sending money and the person or entity receiving the money. The sender initiates the transfer over the internet or at a payment terminal. The transfer request is sent to the sender’s bank and then back to the receiver’s bank. EFTs are commonly used by businesses to pay employees, by utility companies to collect payment for services, and by retailers to pay suppliers. Most EFTs are completed (cleared) and funds are available to use within a couple of days.
What are the Different Types of Electronic Funds Transfer (EFT) Payments?
Electronic Funds Transfer (EFT) is simple but can occur in a few different ways. The most common types of EFT payments are:
Electronic Checks – Sometimes called an e-check, this payment method generates a digital check as authorized by the payer. Many businesses use e-checks to pay their vendors.
Direct Deposit – Direct deposits bypass most of the paperwork of manual deposits and automatically deposit funds into an account. Many employees choose direct deposit as a payment option to eliminate a trip to the bank to deposit checks. The only requirement is a bank account. Users must also complete the initial set-up process, which may require some additional information.
Phone Payments – As the name implies, these EFTs happen over the phone. The payee supplies bank account information to the recipient and verbally authorizes the transaction. Phone payments are often used for utility payments.
ATM Transactions – ATM transactions are a type of EFT that relies on the digital transmission of info between a user’s bank and the ATM machine. When a person withdraws cash from the machine, funds electronically transfer from the person’s bank account and are physically dispensed through the machine instantly.
Card Transactions – When a person makes a purchase using a debit or credit card, either online or in person, account information is electronically received by the issuing bank, and a withdrawal in the amount of the transaction is approved. The payment is then scheduled and typically processes within one to two days.
Internet Transactions – With online transactions, users manually enter their payment card information into point of sale fields on a checkout page. Once that information is submitted by clicking a payment button, the issuing bank processes the payment approval. Just like with in-person card transactions, the payment is scheduled and funds are transferred within one to two days.
Electronic Funds Transfer (EFT) payments are quick, easy, and reliable. They require minimal effort from either the sender or recipient, making them an attractive solution for businesses and individuals alike.
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