eCheck (Electronic Check)

eCheck (Electronic Check)

Simply put, an echeck is a digital version of a paper check. The funds leave the check issuer’s account, pass through an Automated Clearing House (ACH), and end up in the account of the receiving party.

The process sounds similar to a debit card, but the major difference is there is no credit card company involved. This means the money is present and not being credited.

When the funds transfer they pass through the ACH, which is an electronic funds-transfer system. Similar to a bank, it holds the money while it is in transit from one account to another.

The echeck typically works faster than a physical check as it skips the whole process of being written, delivered, and deposited at the bank. There is no waiting for the check to clear and the funds are generally delivered within 24-48 hours.

Because the ACH is used, the intermediary knows exactly how much money is present so the banks don’t need to waste time verifying account balances.

In addition, because the money automatically deposits, a payer does not have to worry about a check sitting somewhere for an extended period and risk a bounced check.

Most bills paid online use an echeck format. Any time the bill requires routing and account numbers it is using an echeck.

Unlike using a credit card, it will show up on your bank statement in a similar manner to a regular check. The only thing missing will be the check number.

There are benefits to using echecks: processing speed, instant confirmation, lower transaction fees than credit cards, and no worrying about monthly payments.

On the receiving end, a business needs to have several pieces of information to establish an account capable of accepting echecks.

• Federal Tax ID
• Bank Account Details
• Business Name and Address
• Transaction Processing Volume
• Years in Business

To accept echecks tends to speed up the whole payment process and reduces the amount of time spent chasing bounced checks. In addition, because ACH payments come in bundles, they are less susceptible to higher per transaction charges present with wire transfers.

It is easy to confuse direct deposit with echeck, but from a business standpoint, they are slightly different. Direct deposits are paid directly from bank to bank while echecks pass through the ACH.

eChecks are primarily used to pay bills. Because of their lower rates they are preferable for higher-priced charges.

The use of echecks not only helps the environment but speeds up the business process for companies and their customers through digital ease of access.