What is an eCheck?
Electronic check, or echecks, are one of the best conveniences of modern-day banking. Aside from doing away with the wasteful and traditional check processing, using an e check is faster and made even more secure with top-of-the line risk management systems in place. Did you know that the majority in the U.S prefer the use of e-check as a payment method? Having a merchant account is not the only way businesses can accept payments.
Get to know what an eCheck is, and how it can be an addition to your business’ payment methods.
What is an eCheck?
An eCheck is the electronic form of your traditional paper check. It is a form of online payment where funds are taken from a customer’s checking account, then processed and transferred to your own account. An eCheck payment goes through a secured Automated Clearing House (ACH) network which happens to be faster and less expensive than the conventional check clearing process. It only takes a day or two for the funding behind an eCheck to be verified. Meanwhile, a traditional check can reach up to five business days to get cleared.
eChecks are more popular with online merchants because of its smaller processing fee as opposed to that of credit card payments. And the best part about it is it can be used for recurring payments. Examples of recurring payments include property lease, mortgage payments, membership accounts, and legal retainers.
How does eCheck work?
Payments made using eCheck are processed in an ACH network. Basically, the process starts with the customer’s checking account. The payment then goes to the ACH network where it is verified before it reaches your bank. After the e-check is cleared, the payment is then credited to your bank account.
Before you can even begin accepting check payments, you would need your merchant account set up. It grants you access to use the ACH network and finally accept Electronic Funds Transfer (EFT). There are two ways for you to accept check payments:
- You can send a copy of an online payment form to your customer to be filled out with their checking account number as well as their routing number including the amount to be paid. It comes with the agreement that by submitting the accomplished form, the customer agrees to get their checking account deducted with the amount reflected on the online payment form.
- You can also transact via a recorded phone call with the customer. Request for their checking account number and their routing number and key in these numbers in your payment terminal. The payment will then be deducted from their account and transferred to your account.
The processing fees for eChecks vary from every merchant account provider but it averages from $0.30 to $1.50 per transaction made.
What happens during the general payment process?
- You receive the authorization through the online form or the recorder call.
- The payment details are entered on the payment terminal as well as the schedule of payments.
- The transaction is then submitted and the ACH transaction process then commences.
- If there is no issue on the check and the checking account, the payment is then automatically withdrawn from the customer’s account and transferred to your account.
- A payment receipt is automatically sent to the customer.
ACH and EFT vs eCheck
The acronyms ACH and EFT do not mean the same as eCheck, but all three terms are correlated with each other. Electronic Funds Transfer (EFT) is the general term for any online payment. It could be a direct deposit, an ACH disbursement, wire transfer, or an electronic benefits payment.
ACH, on the other hand, stands for Automated Clearing House. It is the electronic network used by banks and other financial institutions in America which allows online merchants to process payments through processing companies. The ACH network is monitored closely by both the Federal Reserve and the National Automated Clearing House Association.
eCheck is a form of Electronic Fund Transfer that uses the Automated Clearing House for payment processing. Electronic fund transfers using echeck payments can only be made possible if your merchant account has access to the ACH network.
What are the Advantages of e Checks?
The biggest benefit of using eChecks is the faster payment transfer process than traditional paper checks. However, a shorter processing period doesn’t mean a less secure method. In fact, electronic checks have more security features than conventional paper checks.
Aside from the faster turnaround of payments, here are other advantages of eChecks for your account:
- The cost of an eCheck payment is lower than traditional checks, which results in an overall 60% reduction in processing costs.
- The authenticity of eChecks are much easier to identify. The digital encryption on the checks can help easily detect duplicates. It protects you and your clients from fraud and errors.
- eChecks also contribute to the reduction of paper waste. It’s a greener option for the environment.
- The additional e Check payment option in your account can potentially lead to a higher drive in sales. Have the ability to welcome more customers who opt to use checking accounts.
What are the Dangers of e-Checks?
With the numerous benefits also come the pain points of electronic checks. It’s a valid concern to be worried about eChecks with the threat of cybersecurity these days. Fortunately, encryptions used on electronic check transactions continue to improve with the times. The checking account itself is verified from the ACH database and all bad checks are already rejected from the beginning.
Another perk is all sensitive information is handled safely. No physical paper can get lost in the middle of the processing, lowering the chances of someone else using the information — a huge PCI DSS protocol. The risk of compromising a customer’s sensitive information is lower than standard checks.
Similar to any other online transactions, eCheck transactions are also covered by the Federal Reserve Regulation. Customers can dispute payments within a period of sixty days if the payment made was unauthorized.
It can be deduced that whichever step in the payment process of eChecks, it is secured for both customers and merchants.
How to Get Started?
You would need your own merchant account set up to start accepting electronic check payments and you would need a reliable provider by your side. Get approved in a matter of days and enjoy convenient online transactions. Here are some documents you might need to submit:
- Taxpayer’s Identification
- Proof of Business
- Estimated volume of transaction
Electronic check payments are considered to be a more secure form of electronic fund transfer with lower processing costs and a faster clearing period than traditional checks. Talk to Allied Payments now to get started with setting up your merchant account, and accept e Check payments in no time.