What Is an EFT Payment?

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      EFT payments are becoming increasingly popular as more and more people conduct their financial affairs online. But what exactly is an EFT payment? And why should your business opt for online payment processing?

      In this article, we will answer the question of what is an EFT payment. We’ll also discuss the different types of ETF payments, as well as the benefits and risks of using EFT payments, among other things.

      Key Takeaways


      • EFT (Electronic Funds Transfer) involves moving money electronically from one account to another, suitable for different types of payments.
      • EFT payments include ATM transactions, card transactions, direct deposits, electronic checks, mobile wallets, online banking, telephone banking, wire transfers, and peer-to-peer payments.
      • EFT offers time-saving, efficient expense tracking, improved cash flow, and enhanced security.
      • Human errors can pose challenges with EFTs. EFTs also typically cannot be stopped so checking everything twice to ensure the funds go to the right account is crucial.
      • EFTs are regulated by the Electronic Fund Transfer Act (EFTA).
      • EFTs can be useful for business in a number of ways, including paying employees or vendors.

      EFT Meaning: What Is EFT Payment?

      An Electronic Funds Transfer (EFT) is the movement of money electronically from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems.

      EFT payments can be used for a wide variety of purposes, including bill payments and one-time and recurring payments. Some examples of when you might use an EFT payment include:

      • Paying your monthly mortgage or rent payment
      • Setting up direct deposit for your paycheck
      • Paying your car loan or insurance premium
      • Transferring money between your own accounts at different banks
      • Sending money to friends or family members

      An EFT payment isn’t just one type of payment – several different types of EFT payments come under the Electronic Funds Transfer umbrella. These can include using a credit or debit card, an electronic check, or an ACH (Automated Clearing House) transfer.

      Types of EFT Payments

      EFT Payments Types

      There are several types of EFT payments, many of which assist you in everyday life, such as:

      EFT Type How Does It Work
      ATM payments ATMs can be used to withdraw money, but also make deposits, balance inquiries, and even transfers between accounts, all of which are carried out electronically
      Debit and credit card transactions Probably the most common type of an EFT payment – whenever you use your card to make a payment, the transaction is processed electrically.
      Direct deposit Used to deposit funds directly into a specific account; convenient for businesses to use a way to pay their employees.
      Electronic checks Electronic checks require a bank account number and routing number. They are significantly more secure compared to traditional checks.
      Mobile wallets Mobile wallets allow you to make payments using your smartphone, typically by holding it up to a point-of-sale terminal or NFC reader.Google Pay, Apple Pay, and Samsung Pay are among the most popular mobile wallets.
      Personal online banking Personal online banking allows you to conduct a wide range of financial transactions; you can pay bills, transfer funds between accounts, and check your account balance.
      Telephone banking Allows you to authorize a payment over the phone.
      Wire transfer A wire transfer is an EFT payment method made through the SWIFT network, and is often used when needing to transfer a larger amount of money.
      Peer-to-peer electronic payments P2P payments are electronic payments made between two individuals without needing a financial institution. Many different platforms facilitate P2P payments; Paypal and CashApp are two popular examples.

       

      • Personal online banking
      • Telephone banking
      • Wire transfer
      • Peer-to-peer electronic payments

      EFT vs ACH Payment

      ACH is an automated clearing house network for electronic funds transfers in the United States. All ACH transactions are considered EFTs, but not all EFT transactions are processed through the ACH network. So, an ACH payment is just one example of an EFT.

      How EFT Payments Work

      The best way to explain how EFT payments work is to provide some common examples of how your money moves through electronic payment networks.

      Paying bills online is a prevalent type of EFT payment. When you set up bill pay through your bank, you are providing the bank with information about the company you want to pay, the amount of the bill, and the date you want the payment to be made. The bank then sends an electronic payment to the company on your behalf.

      Another good example is an e-commerce transaction; let’s say you’re buying something on Amazon. You enter your credit card information and the amount you want to spend. Amazon then initiates an EFT payment to your credit card company for the purchase amount. Your credit card company then pays Amazon, and the funds are transferred from your account to Amazon’s account.

      Is It Possible to Stop an EFT Payment?

      The short answer is no. The longer answer is that it depends on how much time has passed from when you made the payment to when you realize you’ve made a mistake.

      When you make an EFT payment, the funds are immediately transferred from your account to the payee’s account. However, this convenience has a downside: once the funds have been transferred, it can be difficult to stop or cancel the payment.

      If you need to stop an EFT payment that you’ve already authorized, your best bet is to contact your bank or credit union as soon as possible. They may be able to place a hold on the payment or cancel it altogether.

      However, it’s important to keep in mind that there is no guarantee that your bank will be able to stop the payment. If the funds have already been transferred out of your account, you may be out of luck.

      How Long Does EFT Processing Take?

      This depends on the type of EFT payment – some are instantaneous, or almost instantaneous (for example some forms of peer-to-peer payments such as PayPal or Venmo), while others take more time, taking even up to a day to reach the recipient (e.g. ACH payments which are sent in batches). International transactions as well as payments involving larger sums of money (usually over $25,000) might also take longer to be processed.

      Benefits and Risks of Electronic Payments for Your Business

      Electronic payments have many advantages, both for individuals and businesses, but, unfortunately, they’re also not free from risks.

      BENEFITS RISKS
      + Eliminate the need for physical payments, e.g. mailing checks
      + Minimize the risk of forgetting to pay a bill
      + Help you keep better track of your finances
      + Help improve cash flow and reduce the risk of late payments
      + Can be less expensive than mailing checks
      + Significantly faster than other payment methods
      + More secure compared to other methods due to being encrypted
      – Possible human error (e.g. inputting wrong bank account number)
      – Usually irreversible

      EFT for Businesses – Uses

      EFT for Businesses

      Now you know why you should consider processing EFT payments – but how about when? In what cases would using EFT payments make sense for your business?

      • Electronic checks – More secure than traditional checks, electronic checks are usually used to pay vendors for materials and supplies.
      • Direct deposit – This is a popular method among employers to pay their employees, especially those who are on regular salary instead of getting paid by the hour. Using direct deposit ensures they always receive the payment on time.
      • Credit and debit card payments – Many people nowadays don’t even carry cash with them, so allowing them to use credit and debit cards for payment expands your potential pool of clients.

      My Payment Savvy – Your Partner in EFT Payment Processing

      At My Payment Savvy, we understand the importance of having a reliable payment processing partner in your corner – and that’s what we are for our customers. We offer a number of EFT payment processing solutions.

      Whether you want to incorporate credit card acceptance into your payment structure, allow your customers to pay using their debit cards, start accepting payment through a text message or add other forms of online payment to your website, we’ve got you covered.

      In Conclusion

      Electronic fund transfers have made financial transactions more convenient, secure, fast, and efficient for businesses and individuals alike. With digital payments becoming the de facto standard for many transactions, it’s crucial to understand how EFTs work and how they can benefit you.

      With My Payment Savvy, processing online payments is easier than ever before. If you’re ready to take that next step for your business, don’t hesitate to reach out to us – we’ll be more than happy to help.

      Jason Rabago

      Jason Rabago

      With close to two decades of experience in sales and operations, Jason never hesitates to go above and beyond to meet our client’s expectations. He is our payment solution guru and attentively listens to a prospect’s current concerns to create a custom product offering guaranteed to check every want and need off the list. Reducing risk and increasing revenue is the name of Jason’s game and he loves providing solutions that substantially affect a company’s bottom line. Looking for an insight as to how your company can operate in a more streamlined manner? Reach out to Jason either at one his regularly attended conferences or give him a ring to discuss how Payment Savvy can elevate your business’ potential.