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What is an eCheck, and how does it work?
Electronic checks, or eChecks, are a convenient alternative to paper checks that are slowly growing in popularity. They’re worth learning how to use, especially if you still send checks by mail.
With eChecks, also known as ACH payments or online checks, you can send payments faster and more securely than with paper checks, with no need for envelopes or stamps. While this digital banking tool is not very widely used by consumers, many of the companies you send monthly payments to already accept them as a form of payment.
What is an eCheck?
An electronic check, or eCheck, is a digital version of a paper check. eChecks have most of the same information you’ll find on physical checks, including your routing and account number, the payment amount, and check number. But when you send an eCheck, the payment can be transferred instantly from your bank account to the recipient's account via the secure Automated Clearing House (ACH) Network, with no need for a physical paper trail.
What can you use eChecks for?
Not all companies accept eChecks, but you can set up eCheck payments for many of your large bills and recurring payments, including:
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Loans
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Credit cards
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Utilities
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Subscriptions and membership fees
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Digital wallet transfers
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Taxes
For retail purchases, eChecks are not usually accepted.
Read more: What is a certified check, and how does it work?
How do eCheck payments work?
When you use an eCheck, money gets transferred from your bank account to the payee's account via ACH payment. The process is safer and requires fewer steps than paper check payments, but you first need to authorize the payment online.
You can follow these steps to set up a one-time or recurring eCheck payment:
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Authorization: Use your bank's online eCheck form or ACH set-up process to give the bank permission to withdraw the funds. Alternatively, to set up payments to a creditor or merchant, look up their online process for setting up eChecks.
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Payment details: Provide the requested information, which may include the recipient's name and payment amount or your bank account and routing number.
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Verification: The sending and receiving parties use the ACH network to verify the payment information and confirm that the funds are available.
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Funds transfer: The funds are transferred out of your account and into the payee’s account.
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Confirmation: You should receive an electronic receipt to confirm the transaction.
Like traditional checks, eChecks can be rejected due to insufficient funds. If your eCheck is rejected, you'll likely be charged the same bank fees associated with a bounced check, and possibly a late fee from the payee.
How long does it take eChecks to clear?
With eChecks, payments can be completed faster than paper checks. Some transactions are processed immediately, though it typically takes up to one business day.
In addition to being processed faster than paper checks, you don't have to order new checks by mail, take time to visit the post office to mail them, or wait for them to arrive at your payee's address. That also means you don't have to worry about the check getting lost or stolen in transit.
Are eChecks safe?
It's normal to feel antsy about switching to a new payment method, but eChecks are far more secure than paper checks. Here are a few reasons why:
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There's no paper document that can be lost or stolen
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They're processed through the ACH network, which means they're encrypted and authenticated
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Fewer people are involved with processing the payment, which leaves less room for human error and theft
Paying by eCheck versus credit card
eChecks are a great alternative to paper checks, but they're not the best choice for all transactions. The best payment method for any given transaction depends on a few details.
For online payments, eChecks and credit cards are both convenient and take roughly the same amount of time to clear, but you might choose a credit card for these reasons:
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No need to authorize the transaction with your bank
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More likely to be accepted by retailers
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Earn credit card rewards
But for some payments, primarily recurring bills, using an eCheck is best. eChecks are more secure than credit cards and debit cards, and they can help you avoid credit card processing fees. Plus, eChecks don't turn your purchases into debt like credit cards do, so you don't have to worry about paying off the purchase later or accruing interest charges.
