An eCheck, or electronic check, is a digital version of a paper check. Just like paper checks, eChecks use the Automated Clearing House (ACH) to faciliate transactions in tandem with payment processors. Because they're done electronically, eChecks are faster, easier, and more secure than traditional paper checks.
How does an eCheck work?
An eCheck works very similarly to a traditional paper check. Funds will be electronically withdrawn from the payer’s account and sent via ACH network to the recipient’s bank, where it’s then electronically deposited into their account. The main difference between this and the process for a paper check is simply that these steps happen electronically.
How to send an eCheck
There are generally two ways to send an eCheck.
The first method is to receive an online payment form from the recipient where you'll fill in details like your checking account number, bank routing number, and amount of payment. You then submit the payment to the payee, authorizing the withdrawal of the amount specified from your checking account.
eChecks can also be generated and processed online, where the payee will use an (usually) automated process for inputting the payment information as well their bank account information. They then can authorize the payments to the recipient.
How to set up eChecks for businesses
Requesting and accepting eChecks requires an ACH merchant account, which is similar to the credit card merchant accounts set up by many businesses. Once your business chooses a merchant account provider, you'll need to provide your Federal Tax ID, estimated processing volume (how many checks you expect to process each month/year), and how many years you've been in business. Once approved, usually, in a few days, you can begin requesting and receiving eCheck payments.
Benefits of eChecks
The benefits of electronic checks are numerous. Electronic checks are capable of being protected by additional security measures such as multi-factor authentication, digital signatures, and multiple forms of digital encryption designed to keep hackers from gaining access to them. And have you ever taken careful measures to ensure that someone can't write in additional zeros or change information on a paper check you've written? This worry is eliminated with eChecks, which can't be changed or adjusted after they've already been issued to the recipient.
Not only are they more secure than their traditional counterparts, eChecks are less costly as well. As consumers aren't required to order checks, fill them out, and deliver them or mail them by hand, the costs associated with purchasing paper checks and postage are significantly reduced or eliminated. Furthermore, the average cost for electronic check processing is around $0.10, versus up to $1 for each paper check.
Lastly, eChecks are considerably faster than traditional paper checks. Not to mention that the sender no longer needs to fill out a physical check and the recipient won't have to go deposit the check, eCheck processing is also more swift thanks to its use of the ACH network.
What's the difference between an eCheck and ACH or EFT?
ACH, which stands for automated clearing house, is a network used by banks and financial institutions in the U.S. An ACH transfer is a funds transfer using this network and involves money being electronically withdrawn from the payer, sent through the ACH network to be cleared and deposited into the bank account of the recipient.
EFTs, or electronic funds transfers, describe an entire category of payments that includes wire transfers, direct deposits, ATM deposits or withdrawals, electronic benefit payments, ACH disbursements, and more.
An eCheck is a type of EFT, using the check format in the digital environment to send and receive payments. Think of an eCheck as a car, the ACH network as the road it drives on, and EFT as the system of all other cars, trucks, and vehicles in the city.
What can you pay for with eChecks?
eChecks can be used for a wide range of online payments and purchases, and they can be used for larger recurring payments such as rent, mortgage, auto loan dues, and membership fees associated with gyms or clubs.
Most vendors accept eChecks as a valid payment method because it's necessary for doing business with larger customers. Sometimes even small businesses opt for eCheck transactions because they want to avoid large fees associated with debit or credit card payments. Since the payment processing fees for credit and debit cards can range from a small fixed amount to a percentage of the entire purchase, regardless of the total value, eChecks are sometimes a more viable and preferred payment option for the merchant.
Can I set up recurring eCheck payments?
The use of eChecks for recurring payments is relatively commonplace. They can be used to create automatic recurring payments for everything from rent and mortgages to other large, monthly, or semi-regular purchases. Sometimes, recurring payments made via eChecks will be referred to as 'recurring ACH payments.'
Processing times for eChecks
While processing times for eCheck payments vary, they generally range between 3 to 5 business days. Within this time period, the funds will be verified as being available, cleared by the ACH, and then deposited and made available within the recipient's account, where they can be used to make purchases and be withdrawn.
See how BILL can help your business with a risk-free trial
BILL makes it easy for business owners to pay with ACH payments with low processing fees. The online payment gateway allows payers to input their payment information in a secure portal, providing added security. BILL also makes it easier to send bills and automatically track payments whether customers use ACH transactions or other types of payments. In addition, everything syncs up with your accounting software, so you save time on bookkeeping as well. Start your risk-free trial today.