What Is EFT?

What is EFT? Simply stated, an Electronic Funds Transfer (EFT) is a way to disperse and collect funds that are less costly than using bank check. "As a means to transfer funds electronically, an EFT may...

"As a means to transfer funds electronically, an EFT may be used in the form of a wire transfer which is available effective immediately, (Western Union) or an ACH which is an electronic, next day, transfer" states Gwen Evans, banking professional with ten years experience in the industry.

Simply stated, an Electronic Funds Transfer (EFT) is a way to disperse and collect funds that are less costly than using bank check. It is also safer and more secure. While it may cost $.83 to issue a check payment, it will cost only $.08 to issue an EFT payment.

An EFT transaction has many forms. They are

* Direct Deposit: This form or EFT lets you authorize deposits like paychecks and Social Security checks, to your account on a regular basis. You also may pre-authorize direct withdrawals so that recurring bills, such as insurance premiums, mortgages, and utility bills, are automatically paid.

* Pay-by-Phone Systems: The convenience of paying by phone instead of driving from service provider to service provider to pay bills is immeasurable. Pay by phone systems allows you to call your financial institutions or the service provider's payment processor to transfer money to their accounts.

* Personal Computer Banking: You can pay all of your bills by just pressing a button thanks to personal computer banking. Account balances, transfers and bill payments can be done through this type of EFT.

* Point-of-Sale Transfers: Paying for purchases with your debit card is a form of EFT when the PIN number is used. The automatic transfer done in this case is faster than the signature credit card option, which can take days to process. Point of Sale Transfers are the cost common use of EFT.

* Electronic Check Conversion: Some merchants process checks through an electronic system that captures your banking information and the amount of the check. This is called Electronic Check Conversion. In this type of transaction, the merchant does not keep the check, but returns it to the customer with a receipt that must be signed to authorize the transaction. The customer should void the check so that it cannot be used again. In addition, some utility companies, and other services like health clubs process checking information for monthly debits to the customers or members account.

Caution is advised when using EFT (Electronic Funds Transfer) for payments.

It is important to keep close track of how much is to be debited from an account and when. A miscalculation or oversight could result in bounced checks due to insufficient funds. It is wise to use EFT payments only when the amount being debited from the account is the same every month, or when the amount has a maximum amount cap.

Using EFT payments for unpredictably fluctuating service providers like the gas or telephone company may cause unpleasant surprises. It is also advised that Electronic Funds Transfer payments only be done with well-established companies and people you know and trust in order to protect your banking information and your credit rating.

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