EFT 101: What Are EFT Payments?
Sign up to receive more well-researched small business articles and topics in your QuickBooks inbox, personalized for you. Anna is a retail expert writer, contributing to Fit Small Business POS and payments sections. She has evaluated dozens of software for small business owners for over six years and has developed a passion for POS and payment technology. In this article, we at the MarketWatch Guides team cover how EFTs work, the types of EFT payments and how safe EFTs are to use. Adam B. Frankel is a personal finance writer and financial adviser with over 30 years of experience.
Are EFT payments secure?
- Individuals, businesses, and banks use EFTs daily to purchase goods and services and pay workers.
- It’s an instantaneous transfer of funds, without banking information being exchanged.
- Customers can sue for damages if banks or financial institutions break any of the laws established by the EFTA.
- In 2018, almost 100% of government salaries were paid through EFT processing.
- Then, he financial institution has up to 45 days to investigate and resolve the issue.
The good news is that EFT payments are electronic funds transfer protected through the Electronic Fund Transfer Act, giving you legal recourse if something’s amiss with a particular transaction. Direct deposit is one of the most straightforward EFT payment methods — funds simply move from one account to another. A one-time EFT payment is a single electronic funds transfer not set up as part of a recurring payment schedule. If you are making an international EFT payment, there may be additional fees charged by your bank or the recipient’s bank. These fees vary depending on the banks involved and the amount being transferred. The best thing to do is to check with your bank beforehand to see what fees may apply.
How long do EFT payments take to clear?
When you buy a house, the mortgage company may even ask you to wire funds in time for the closing. Credit and debit cards use electronic payments to process purchases made in person or online. In addition, you can use EFTs to pay bills, such as for phones or utilities, and transfer a credit card balance to a new credit card account.
What is an electronic funds transfer? EFT meaning and types
- An electronic funds transfer is the electronic transfer of money between people, banks and companies.
- Depending on the type of EFT, it can take just a few seconds or a few business days to process.
- Peer-to-peer payment services such as Zelle, Venmo or PayPal make it easy to send money quickly through your bank or an app.
- Instead of waiting for checks to arrive, you can sit back and relax as funds are directly deposited into your account—and automatically recorded to help keep everything organized.
But today, electronic payments are a faster, safer, and more reliable option. Find out everything you need to know about the EFT payment process with our handy and definitive guide. Electronic fund transfers are great alternatives to credit card payment methods mainly because they cost considerably less to process without sacrificing security. However, most EFTs take slower to settle so they are not ideal for certain business types. That said, payment technology is steadily catching up and will hopefully become a more viable payment method for small businesses in bookkeeping and payroll services the near future. Because EFT is a catch-all phrase, there are different types of transactions under this umbrella term.
- From a business perspective, using electronic fund transfers for vendors and payroll makes bookkeeping and accounting much simpler.
- You’ll also need to provide more information, such as the employee’s bank name and account information.
- Since accounts and available funds are verified electronically, often before money is released, there’s a lower risk of entering the wrong dollar amount or account number.
- You can also usually leave funds in your P2P account to eliminate the ETF needed to move funds to and from your bank account.
- Automated Clearing House (ACH) is a national network linking U.S. financial institutions.
Under the EFTA, you’ll have some legal protection if something goes wrong. If given the right incentives, 40% of consumers are open to using pay-by-bank payment methods (EFTs). Alternatively you can read out your card details over the phone or enter the details into the merchant’s site if you’re transacting online. The payment will process automatically with no need to take any further steps. Whenever you spend in a store or restaurant with your credit or debit card you’re initiating an EFT payment. The Electronic Fund Transfer Act (EFTA) provides a layer of protection for EFTs.
