Business owners are constantly faced with bit types of payments because they have to pay their employees, utility providers, vendors, and other businesses. Previously, such payments were made using paper checks, but progress does not stand still, so now almost all people use online payments. Thus, at the moment, electronic payment is perhaps the fastest, safest, and most reliable option. This is where EFT comes in – but what is it? Read on to find out all the information you need to know about the EFT payment process.
EFT Meaning: What Does EFT Stand For?
So, before we know what EFT is, let’s decipher the acronym. So, EFT is Electronic Fund Transfer which is used to transfer money from one account to another. It is important to note that two accounts can be either in the same or in different financial institutions. The transaction is completed electronically.
Important! Please note that “EFT” does not refer to a specific type of payment, as it is a fairly general term that encompasses a large number of electronic payments.
What Is EFT In Banking? How Does It Work?
The EFT banking definition does not differ from the traditional EFT definition. All you need to know about EFT is that the payments are processed by the bank and this happens through the ACH (the Automated Clearing House) network. ACH connects all US financial institutions, from banks to credit unions. It’s also important to note that ACH handles wire transfers in batches. Thus, transactions escalate throughout the day and are processed in batches later.
How To Complete an EFT Payment?
It’s simple enough! In order to perform an EFT Payment, the sender must provide some important information, such as the type of account where the funds are received, the recipient’s account number, the recipient’s routing number, and the name of the recipient’s bank.
What Are The Types Of EFT Payments?
As mentioned, EFT is a generic term for Electronic Fund Transfer. However, what types of payments fall under the EFT category? If you have not dealt with this before, it will be quite difficult for you to distinguish between the types of payments, so below you can study those related to EFT:
- ATMs. Most likely you have used ATMs at least once in your life. So ATM is an Automated Teller Machine that allows people to both withdraw and deposit. Also, using ATM, you can transfer funds or check your balance without having to visit the bank and wait in line.
- Direct deposit. You probably know that direct deposit is a type of electronic transfer that allows employers to pay their employees electronically without having to use paper checks. This way, you or your direct deposit service provider can deposit the required amount into the worker’s account. The recipient will be able to receive funds on payday, which is very convenient for both the employee and the employer.
- Wire transfer. To send large amounts of money, wire transfers – electronic money transfers are used. For example, if you need to make a large down payment, then wire transfer will be the best option for you.
- Credit or debit card. Of course, wire transfers can also be made using a debit or credit card. Thus, you can use your card to make purchases, transfer money, and more. Credit or debit card payments are also considered EFT payments.
- Electronic check. If you have ever seen a paper check, then you should understand that an electronic check is exactly the same, only in electronic form. All you need to make a payment is to enter your routing number and bank account. Electronic checks are popular because they cannot be stolen by intruders, which is why fewer people prefer traditional paper checks.
- Pay-by-phone system. This EFT payment is an electronic transfer method that allows people to send money between different accounts over the phone. You can also pay your bills with the pay-by-phone system