Do you want to know What Is an Electronic Funds Transfer? Then you should keep on reading and then get to know all about the EFT which simply means (Electronic Funds Transfer). An electronic funds transfer (EFT) is just a method one can use to move money across an online network, between banks and also people.
When you make a payment these days, odds are that you are simply using an EFT to make it happen. Friends can even also use EFT payments to split a restaurant bill, and also businesses can use EFT payment options to simply get paid by their customers. With so many uses, EFT payments are essential to how cash moves through the economy and your life.
What Is an Electronic Funds Transfer?
An electronic funds transfer is simply the electronic transfer of cash or money between people, banks, and companies. This payment technology has been used to pay bills, send money to friends and also family, and even compensate workers each payday.
EFT payments are also a speedier alternative to physical payment methods like cash and checks. Direct deposit, credit card transactions, ATM transactions, electronic checks, and also phone payments are all types of EFT payments.
What Is an EFT Payment?
An EFT payment is another name for an EFT transfer. If you have simply used online banking to move money from your checking to your savings account, then you have used EFT technology. Likewise, if you have then used an app on your smartphone to send money to a friend for a restaurant tab, then you have also used EFT technology.
What Are Peer-to-Peer Electronic Payments?
Apps like the Cash App, PayPal, and Venmo make it very easy to be able to send funds from person to person in a flash. These peer-to-peer (P2P) payment systems simply make use of EFT technology to move money.
When you then register to use one of these applications, you can even link your debit card, bank account, or both. Some apps allow even you to connect your credit card (usually for a charge per transaction). When you then want to send a payment, you can simply open the app, enter the information for the receiving party, then confirm your transaction and send money.
P2P platforms can even also act as holding tanks for funds received. Some users do not even transfer funds through these apps to their banks. They simply leave money in the app and then pay vendors and also people directly, using the P2P platform as a makeshift bank account. Some peer-to-peer payment apps, such as PayPal, offer debit cards to their users, making it very easier to access funds held in the payment platform.
How Does EFT Work?
EFT payments simply need two parties to be able to operate: a sender and a receiver. When the sender commits to sending funds to the receiver, that payment will simply go out through the appropriate payment network and also moves the money from the sender’s account to the receiver’s account.
Here are two instances to help you understand how money moves across payment networks.
- Let’s say you are at the grocery store and ready to pay. At checkout, you can slide your debit card into the payment terminal to settle your bill. Once you have entered your PIN and approve the transaction, money is been moved in real-time from your checking account to the grocery store’s account. You can grab your groceries and head home.
- Another instance is a paycheck direct-deposited into your checking account. For this transaction, your employer is the sender and you are then the receiver. When you set up direct deposit, you will then need to provide your employer with your bank account and also routing number. Your employer inputs your banking information into their payroll provider’s system. The payroll provider will then initiates a transaction that debit’s your employer’s bank account and also sends funds directly to your account. These transactions can take place or happen over the ACH network and take a few days to complete.
What Are the Types of EFT Payments?
In the year1978, the U.S. government passed the Electronic Fund Transfer Act (EFTA), which then outlined consumer protections around specific types of electronic conveyances of money. Here are the types of EFT payment that are protect by the EFTA:
This EFT payment type simply replaces paper checks. Typically, you will tell a vendor it is okay to use your checking account information to create a virtual check and also submit it for payment.
Instead of receiving a monthly physical check, this EFT payment method can electronically deposit your payroll funds into your bank account.
You can even pay bills over the phone by giving a company your banking information. The company then initiates a debit to your bank account for the agreed-upon amount.
When you then withdraw or deposit money from your accounts or move money between accounts at an ATM, you are using an EFT payment method.
Credit Card Transactions
You can then be able to make payments toward your credit card balances using EFT payments. You can even use EFT to transfer balances from one credit card to another.
What Are the Benefits of EFT?
Electronic funds transfers allow you to be able to send and receive money faster than you would with a check.
And EFT technology makes it easy for you to do business where you want. and even buy groceries from your living room and also then tip your Uber or Lyft driver from your mobile device. You can even put all of your household bills on auto-pay each month, avoiding late charges. You can also then pay friends, family, and colleagues quickly and efficiently by simply using a peer-to-peer payment app.
Are EFT Payments Risky?
It might seem daunting to share your bank account information with a business and also let it debit your account each month. The good news is that the EFT payments are simply protected through the Electronic Fund Transfer Act, simply giving you legal recourse if something is amiss with a particular transaction.
Here are some protections consumers enjoy under the EFTA:
- Unauthorized transactions. Consumers can have 60 days to report any unauthorized transactions to their financial institutions for investigation. But, if you miss the 60-day window, then your financial institution is not obligated to investigate the incident.
- Lost or stolen debit cards. If you then report your lost or stolen debit card within two days, the EFTA limits your liability for unauthorized transactions to about $50. But, if you do not report the loss or theft within 60 days, you can be liable for all unauthorized transactions.
- Compensation for violations. If your bank violates the guidelines established by the EFTA, you can then potentially recoup damages from your bank in court.
- Withdrawal limits. Your bank is also required to put daily withdrawal limits on your debit card to then protect you from excessive and potentially unauthorized withdrawals.
It is very important to note that timeliness is a key factor in limiting your liability for unauthorized transactions. It is imperative to review your bank statements regularly to check for transactions you do not recognize.
What’s the Difference Between EFT and ACH?
ACH transactions can simply happen on an electronic funds transfer network called the Automated Clearing House. All the ACH payments are EFT payments, but not all EFT payments are ACH payments. An ACH payment must pass through the Automated Clearing House network.
ACH payments are then typically used for direct payments like payroll direct deposits and also recurring payments you can even make each month to companies for your utilities and rent. Unlike debit and credit cards, EFT transactions that happen in real-time, ACH payments are also processed in batches each day and can even take one to four days to complete. Larger banks can often process ACH payments faster than smaller banks.
How Do Electronic Funds Transfers Work For International Payments?
Electronic Funds Transfers Work for International Payments, International EFT payments work much like domestic EFT payments but might then come with heftier fees or restrictions. But there are still benefits that the service provides.
What Is The Processing Time For EFT Payments?
The EFT payments might even take up to two business days to process. The shortest processing times are usually for payments that are been sent between bank accounts at the same bank.
What Is A One-Time EFT Payment?
A one-time EFT payment is simply a payment you will initiate with a company that does not have your banking or debit card information on file. You are only then authorizing a debit to your account once for a specific amount due.
What Is An Example Of An Electronic Funds Transfer?
The Electronic Funds Transfer Example, now for instance. Individual cash withdrawal with an automated teller machine (ATM) is an EFT. Electronic bill payment can help you to set up on a recurring scheduled basis to pay utilities and also regular services. Direct deposit payroll systems set up at businesses.