EFT, which stands for Electronic Funds Transfer, refers to the electronic transfer of money through an online payment system. This transfer can occur within the same bank or between different banks. EFT transactions commonly rely on payment platforms such as the Automated Clearing House (ACH) for ACH payments, Fedwire, or SWIFT for wire transfers, and debit and credit card networks.
EFTs are gaining popularity in B2B payments, as companies move away from traditional paper checks to more efficient and cost-effective E-Payment options like ACH. The EFT could occur between bank accounts or between accounts in different banks. Other kinds of transactions that can be classified as EFT include direct deposits, ATMs, virtual cards, e-Checks (used all over the world), and peer-to-peer transactions as well as personal computer banking.
As traditional paper processes are electronic, computerized systems such as EFT transactions continue to grow and change. Examples of this include the payment of utility bills has always required paper, which meant physically-based statements, bills, checks, and receipts. These transactions now take place on digital networks and are referred to in the form of ACH transactions. This shift is changing the paradigm of banking.
How Do Electronic Funds Transfers Work?
There are many different ways in which electronic funds transfers can be used. The most well-known kind used for EFT occurs when you make use of credit cards or debit cards to pay for purchases. Upon utilizing your debit card for a transaction, the issuing institution will remit payment to the respective retailer for the incurred expenditure.
Another kind of EFT is when you use your bank account to purchase something on the Internet. If you input your account details and the bank makes the transfer of funds from your account into that of the seller’s bank account.
Consider arranging automatic payments from your checking account to ensure timely payments of bills such as mortgage or car payments. This is referred to as the automated clearing house (ACH) transaction. In the ACH transaction, the cash will be transferred on a specific day every month, from the account of your merchant to their.
What are The Benefits of Using EFTs?
Utilizing EFTs for bank transactions offers a multitude of advantages. The most obvious advantage is that EFTs will save you both time and cash. By using an EFT it is possible to make a payment without needing to write a check or utilize a money order. This is a huge time-saver, particularly when you have to make multiple payments within a short amount of time.
Another advantage of EFTs is they are extremely safe. When you initiate an EFT the money is immediately transferred from your account into the bank account of the recipient. This reduces the chance of losing money or being able to steal it.
Additionally, EFTs can assist you in keeping track of your expenses. When you initiate an EFT your bank is likely to issue you the receipt or any other evidence for the transactions. This feature proves to be useful when you are prepared to review your account balance or submit your tax returns.
What are The Different Types of Electronic Funds Transfer (EFT)?
The types of EFT (electronic transfer of funds) include:
ACH Payment or ACH Direct Deposits:
Electronic money transfer is a type of transaction commonly referred to as ACH. ACH credit and ACH debits to bank accounts for online transfers are direct deposits as well as electronic checks (electronic checks) for one-time payments, or automated bill payments that recur to pay bills. The ACH network serves as a platform for bank transfers between financial institutions, including credit unions and banks, to process ACH transactions.
A U.S.-based ACH transaction is made using information about the bank account, which includes the routing number of the bank (ABA number) and the number of the bank account for both the payee and payer as well as their bank of origin and the receiving bank. ACH transactions are possible by using Same Day ACH or Next Day ACH in which day is the term used to describe a business day.
The international ACH electronic payments could be referred to as global ACH payments when they utilize similar networks similar to the ACH network for electronic payments. SEPA, or Single Area Euro Payments, is an electronic payment method for credit and debit transfers within the European Union (EU). This form of payment is equivalent to a global ACH payment or EFT payment. SEPA serves as an effective solution for cross-border payments.
ECommerce and Point of Sale Retail Transactions as EFT:
Electronic funds transfer (EFT) encompasses transactions made through bank account transfers, online debit cards, and credit cards via an electronic payment processor. Examples of such transactions include electronic point-of-sale (POS) payments made by customers to merchants at physical stores. Cash transactions that are on-premises and made using cash or paper currency such as quarters and dollar bills are not considered as EFT.
Credit Card or Debit Card Transactions Always EFT:
Electronic transfers of funds (EFT) occur between the buyer and recipient when conducting debit or credit transactions with a credit card. The cost of the purchase, which includes sales tax, is electronically charged to the buyer using a credit card, or their bank account by using the debit card. The money is electronically transferred in batches to the customer’s account at a bank.
Phone-Initiated Fund Transfer as EFT (Electronic Funds Transfer):
Various government agencies and corporations offer a phone-based payment option that entails an ACH transfer, credit card, or debit card. These types of payments, processed electronically by an organization based on the instructions given by a phone call they are known as EFTs, or electronic funds transfers (EFTs).
Bank ATM (Automated Teller Machine) as Electronics Fund Transfer (EFT):
Transactions at ATMs in banks, which electronically transfer funds across bank accounts to deposit funds, or withdraw funds from a bank account in cash are just one type of electronically transferred funds (EFT) that utilizes online banking. ATM transactions can be initiated with a debit card issued by a bank and password.