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All About Electronic Fund Transfer

May 3, 2018
Electronic Fund Transfer

Electronic Fund Transfer is the transaction that takes place from bank account to another bank account within single or multiple institutions across the world. 

Imagine without EFT Transfer

  • Can you imagine trying to shop on the Internet and the only way to pay is by sending a check in the mail?
  • How about not being able to use a credit or debit card when you went out to eat or put gas in your car?

The way in which we transfer money has advanced tremendously over the last few years.

PayPal, online bill pay, and mobile payments are all examples of recent advancements.

These changes refer to electronic funds transfer or the electronic transfer of money from one account to another.

Electronic funds transfer uses computer systems to move funds without the need for paper documents.

Yes, people sometimes still use paper checks, but electronic funds transfer methods are now the preferred way to do business.                                  

It stores user’s money for future payment transactions, which can do online and through cash withdrawals. When the transaction makes within the same financial institution it is known as a peer- to -peer transfers.

The transaction is done by using a credit or debit card.

Advantages of EFT

An electronic fund transfer works by using computer technology and not paper transaction in order to transfer money.

Most of the institutions use ATM cards and personal identification numbers (PIN’s) while transferring through EFT. Personal computers banking allow transactions through a personal computer and debit card payments, which customers make payments and purchase using a debit card.

And lastly, electronic check conversion converts paper checks into electronic payments.

Common EFT services include ATMs, direct deposit, pay-by-phone systems, personal computer banking, debit card transactions and electronic check conversion.

The process of Electronic fund transfer cannot reverse if a sender should enter an incorrect account number.

It is an easy and convenient method of transaction.

It is less labor intensive on the banking side and ensures that consumers receive funds faster.

Transactions done through EFT’S reduces float time and this can help the consumer’s save their money in overdraft fees because the money in EFT will be available in most cases.

On the customer’s side it reassures access to funds and on the banking side, it is ideal to have funds confirmed on time.

EFTis very feasible as the employee can change his/her mind at a later date and go back receiving a regular paycheck.

ACH Transaction

  • EFT is also referred to as ACH  transaction which means Automated clearinghouse, which is a nationwide electronic payment network that allows clearing of electronic payments and information related to payments between institutions.
  • The information sends along ACH  transaction, this process is known as electronic data interchange.
  • It is very cheap.
  • For example, by using online bill pay every month to pay various bills like water, gas electricity and credit card, you could save the postage on every bill paid. So if you pay 10 bills in a month you are thereby saving $5 in postage plus cost of checks for the month plus it only takes a few minutes to pay all your bills online.
  • This way it saves time also.

Because the electronic fund's process is simplified and entirely electronic, the cycle of transferring and paying money is much faster.

Let's now compare both traditional and electronic processes side by side.

Writing a Paper Check

  • The store manually deposits the check at their bank, and the bank sends the check to a clearinghouse or an establishment where checks and bills exchange.
  • The clearinghouse sends the check to the customer's bank to post.
  • This is an older process that contains no electronic money transfer and would usually take at least a week to complete the cycle.

EFT Process

  • When you use your card at a store, money is transfer electronically from your account and then it is deposit simultaneously in the store account.
  • This may involve an automated clearing house or sometimes a central electronic processor, which could add a day to process, but it is still much quicker.
  • The process for a consumer to set up online bill pay, direct deposit, or direct debit is fairly simple.
  • It usually involves providing data to the financial institutions, including your bank routing and account numbers, vendor account numbers you want to pay and dates of payments.
Here are some EFT Transfers

ATM’S are electronic terminals that let you bank almost virtually any time.

To withdraw cash, make deposits, or transfer funds between accounts, you generally insert an ATM card and enter your pin.

Some financial institutions and ATM owners charge a fee particularly if you don't have accounts with them or if your transaction takes place at remote locations.

Direct Deposit lets you authorize specific deposits — like paychecks, Social Security checks, and other benefits — to your account on a regular basis.

You also may pre-authorize direct withdrawals so that recurring bills — like insurance premiums, mortgages, utility bills, and gym memberships — pay automatically.

Pay-by-Phone Systems let you call your financial institution with instructions to pay certain bills or to transfer funds between accounts.

You must have an agreement with your institution to make these transfers.

Personal Computer Banking lets you handle many banking transactions using your personal computer.

For example, you may use your computer to request transfers between accounts and pay bills electronically.

Debit Card Purchase or Payment

The process is similar to a credit card, with some important exceptions and the money gets transfer easily from one bank account to the company’s account, so there will be sufficient funds available in the account to complete the purchase.

EFT Disclosures

To make sure of all the rights and responsibilities of the EFT’S read the documents you get from your financial institution that issued your “access device”-the card, code or another way you access your account to transfer money electronically.

Before you contact for EFT services or make your first EFT transfer you need to look into the following conditions:

1)summary of your liability for unauthorized transfers.

2)The phone number and address for a contact if you think an unauthorized transfer has been or may be made, the institution's "business days" (when the institution is open to the public for normal business), and the number of days you have to report suspected unauthorized transfers the type of transfers you can make.

3)A summary of your right to get documentation of transfers and to stop payment on a pre-authorized transfer, and how you stop payment.

4)A notice describing how to report an error on a receipt for an EFT, to request more information about a transfer listed on your statement, and how long you have to make your report.

5)A summary of the institution's liability to you if it fails to make or stop certain transactions circumstances when the institution will share information about your account with third parties a notice that you may have to pay a fee charged by operators of ATMs where you don't have an account, for an EFT or a balance inquiry at the ATM, and charged by networks to complete the transfer.


You have 60 days from the date a periodic statement containing a problem or error was sent to you to notify your financial institution. The best way to protect yourself if an error occurs is to notify the financial institution by certified letter.

Ask for a return receipt so you can prove that the institution got your letter. Keep a copy of the letter for your records.

For Other Information and Complaints

1)Take care of your ATM card and make sure you don't lose it.

2)Choose a PIN for your debit card that's different from your address, telephone number, Social Security number, or birthdate. This will make it more difficult for a thief to use your card.

3)Keep and compare all your EFT transactions so that if any errors find can reports.

4) Be aware that some merchants or companies may process your check information electronically when you pay by check.

5)Contact your bank or any other financial institution if you figure out any unauthorized transactions or errors.


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