Glossary

What is an Electronic Check (eCheck)?

An electronic check is a means of making payments online through the internet or other network, designed to perform the same functions as a paper check. eChecks are considered a more convenient and secure alternative to paper checks, requiring less steps to create and process and leaving less openings for checks to be lost, stolen, or fraudulently adjusted.

Electronic checks are also 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.

Perhaps the most commonly used application for electronic checks is for businesses making direct deposits through echeck payments to employers for their paychecks.

Another benefit of echecks is that they tend to come with less costs and fees, making them desirable for businesses that process a high number of checks on a regular basis.

How do Electronic Checks (eChecks) Work?

Electronic checks are one of a few different types of transactions that fall under the classification of electronic funds transfers (EFTs). Other EFTs include ATM withdrawals or deposits, mobile check deposit, and any debit card transaction. If a transaction requires connection to the internet or a network in order to process, it’s usually a form of EFT.

As the world of ecommerce rose in the late 90s and early 2000s, consumers and businesses alike needed a way to securely and accurately make and receive payments online. They simply applied all of the same rules and regulations that govern paper checks to electronic checks, creating a form of payment that could be used for anything paper checks could be used for in the past. In fact, the very first digitally based form of payment used by the U.S. Treasury was an echeck.

eCheck Benefits

The benefits of electronic checks are numerous. Not only are they more secure than other forms of payments, they also allow for faster echeck processing than paper checks. They also save money, as consumers aren’t required to order checks, fill them out, and deliver them or mail them by hand. Meanwhile, check recipients don’t have to retrieve and deposit paper checks by hand. Costs like postage, the cost of printing paper checks, and more are all reduced or eliminated.

Electronic checks also come with lower fees, with an average fee for processing a single check being around $0.10, versus up to $1 for each paper check.

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 virtually eliminated with virtual checks, which can’t be changed or adjusted after they’ve already been issued to the recipient.

What’s the Difference Between an eCheck and ACH or EFT?

With all of the various terms relating to electronic payments, it can be difficult to keep them all straight.

EFTs, or electronic funds transfers, describe an entire category of payments that includes wire transfers, direct deposits, 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.

ACH, which stands for automatic 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 network to the bank of the recipient, then cleared and deposited into the recipient’s account.

An eCheck is a type of EFT, and it involves using the ACH as the network for processing payments. Think of an eCheck as a car, the ACH is the road it drives on, and the EFT is the network 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 in some cases vendors are required to accept them. They can be used for major purchases and payments, including rent payments, mortgage payments, car payments, and membership fees associated with gyms or clubs.

Meanwhile, echecks can also be used for smaller one-off payments in cases where an individual wants to avoid the fees associated with using a debit or credit card. These fees can range from a few cents to several dollars, and in some cases are less secure. This makes echecks a more viable option in many cases.

Can I Set Up Recurring eCheck Payments?

The use of eChecks for payment processing of recurring payments is relatively commonplace. They can be used to create automatic recurring payments for everything from rent payments and mortgages to other large, monthly or semi-regular purchases. Sometimes, recurring payments made via eChecks will be referred to as ‘recurring ACH payments’— these are the same as recurring eCheck 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.

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 account numberrouting number, and amount of payment. You then submit the payment to the payee, authorizing the withdrawal of the amount specified from your account.

eChecks can also be generated and processed online, where the payee will use a (usually) automated process for inputting a payment information and then authorizing it to be submitted.

How to Set Up eChecks for Businesses

Requesting and accepting eChecks requires an ACH merchant account, which is similar to credit card merchant accounts setup 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.


The content found here is for informational purposes only, and not for the purpose of providing advice, including but not limited to, financial, legal, or tax advice. Any opinion found here does not necessarily represent those of Bill.com.

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