An electronic funds transfer is a name that can be applied to any number of transactions that include the transfer of money between two financial accounts without the use of tangible currency or other paper formats. The money is usually transferred using electronic systems, namely, those involving computers. Direct deposit, direct debit payments, electronic bill payment and wire transfers are just a few types of transactions that can be classified as electronic funds transfers.
These types of transactions can be completed between two accounts within the same institution or unrelated institutions. The transactions can be processed through a network called the Automated Clearing House (ACH). The ACH network provides a secure way for banks to connect with each other and transfer money.
A popular electronic funds transfer program involves direct deposit. Many employers use this program deposit payroll directly into their employees' bank accounts. Advantages of direct deposit include a paperless payroll and the immediate receipt of the funds.
If consumers make payments to a company for goods or services through an electronic funds transfer, the funds are electronically transferred from the consumer's bank account to the business's bank account. These types of transfers can occur relatively quickly. Usually, a transfer will complete in less than 24 hours after a specified, scheduled date selected by the consumer.
Consumers can also use electronic funds transfer as part of their online banking activities. Paying bills through their bank's online system can include the transfer of money without having to use physical currency. Payments can be electronically debited from the consumer's account. Sometimes, however, banks offer the option of printing out paper checks and mailing them to a business on behalf of the consumer. In cases such as these, consumers are asked to authorize that the check be printed out and sent.
Electronic funds transfers have gained in popularity, but many companies and consumers still choose to use paper for their billing and payment needs. Switching to electronic funds transfer have many benefits for all those involved in billing and payment systems. By adopting the electronic funds transfers, businesses could save money in administrative costs, consumers could experience greater security and both could enjoy easier record-keeping practices.
Of course, switching to electronic funds transfer can also help the environment, because fewer paper resources, such as for bills and checks, would be used. Postage costs would also be reduced or negated. Consumers interested in trying paperless bills should contact companies with which they hold accounts and ask about setting up electronic access to their accounts through the companies' websites.