What Is an E-Check? How does Electronic Check Work? – Banking Advice 2023

What Is an E-Check? An electronic check is a digital version of a paper check that is used to make online payments to consumers and businesses via a data network.

Let’s read more about it.

What is an echeck

What is an check?

An electronic check is an electronic version of a paper check and is used to make online payments to both consumers and businesses through a data network.

It’s also known as an electronic check, online check, internet check, and direct debit, is a digital counterpart of a paper check.

Where should you order checks?

The connection between business, customers, and e-checks

The automated clearinghouse network, or ACH, is used by millions of consumers and businesses to make payments, such as paying your mortgage bill or credit card online.

Businesses use ACH to pay employees with direct deposit and supplier invoices.

ACH is preferred because payments arrive on time and it eliminates the complexity of late and lost checks.

Bob Castaneda, program director for Walden University’s accounting and finance programs, says e-checks are beneficial for both businesses and customers because it allows for faster payment processing and immediate access to deposit payments.

“For customers, e-checks can be a more secure way of paying because it eliminates the need for your personal documents to be handled by someone else,” he said.

How does Electronic Check work?

An eCheck, also known as an electronic check, is a digital version of a paper check.

Money is electronically withdrawn from the payer’s checking account, transferred over the ACH network, and deposited into the payee’s checking account when using an eCheck.

To conduct an electronic check, you must go through the following steps:

Request permission

Before proceeding with the transaction, the company must obtain authorization from the consumer. This can be accomplished through the use of an online payment form, a signed purchase form, or a recorded phone call.

Setup of payments

The company enters the payment details into the software used for accepting online payments after permission. If the payment is recurring, this information also provides the recurring schedule.

Complete and submit

Once the information is properly input into the payment program, the firm clicks “Save” or “Submit” to begin the ACH transaction procedure.

Deposit funds

The money is automatically deducted from the client’s bank account, the online program provides the consumer a payment receipt, and the payment is put into the business’ bank account. Three to five business days following the start of the transaction, the money is usually placed into the merchant’s bank account.

What are the benefits of Electronic Testing?

Electronic checks are commonly used by businesses and consumers to pay bills because they are reliable and transactions can be done instantly. These transactions are also less expensive for businesses than buying checks and mailing them on a regular basis.

Advantages for Businesses

“Electronic checks also help businesses save money on hiring staff to process checks,” says Castaneda.

These payments are also beneficial because they eliminate the possibility of late payment due to delayed or lost mail. These payments can also be tracked digitally, making it easy for businesses to track payments to employees and suppliers and also know when they receive payments from customers.

Customer Benefits

Consumers can budget and plan better because they know when their payments on bills like student loans or car loans will happen. They don’t need to go to the bank or use the bank’s mobile app to deposit a cheque they receive electronically.


There are no interchange fees for accepting e-checks, said Michael Reed, president of payments for Deluxe, a business services company based in Shoreview, Minnesota. individuals or businesses that make periodic payments.

“Particularly valuable in the current environment, electronic checks provide a way to send payments without human intervention or manual processes,” he said.

Best Example of Electronic Checks: Direct Deposit Checks

Direct deposit checks

Direct deposit is commonly used by employers to pay their employees and makes it easy for consumers to set up automatic savings plans.


Using direct deposit eliminates the risk of paper checks being lost or stolen, funds are available sooner than withholding paper checks, and direct deposit can be divided by multiples, says Greg McBride. accounts, chief financial analyst at Bankrate, a financial data company based in New York.

“While most deposits can go into a checking account to pay regular bills, an additional direct deposit can go into a savings account for emergency savings,” he said. save for vacations.

Belinda Reany, division vice president and general manager of ADP’s Employee Financial Services Venture, one of the more frequently used versions of electronic checks is the direct deposit system offered by many employers.

“In the past there was the inconvenience of receiving checks and withdrawing cash, and now there are also health and safety concerns associated with those jobs,” she said.

How are electronic checks safer than paper checks?

Echeck safer than paper check

Another advantage of an electronic check is that it cannot be stolen from an individual’s wallet or mailbox. And paper checks still need to be verified by a bank, which automatically holds all deposits.

E-check funds are available instantly and consumers can easily see if their employer is direct deposit by checking online or through the device app mobile.


Electronic checks can eliminate or reduce instances of fraud.

Are ACH and EFT the same thing as eCheck?

EFT is an abbreviation for “Electronic Funds Transfer.” Wire transfers are one of the various forms of financial transactions included by this all-inclusive phrase.

  • Deposits made directly.
  • Benefit payments are made electronically.
  • ACH transactions.

ACH is an abbreviation for “Automated Clearing House.” This is the electronic network utilized by financial institutions in the United States to offer infrastructure for payment processing firms, as previously stated. Find out more about ACH here.

The easiest approach to describe the similarities and differences between ACH, EFT, and eCheck is to say that an eCheck is a sort of electronic funds transfer (EFT) that processes payments through the Automated Clearing House (ACH) network.

An eCheck involves the electronic withdrawal of funds from the payer’s account, transmission of those funds to the payee’s financial institution through the ACH network, and electronic deposit of those funds into the payee’s account. This is done in the same way as paper checks are processed, just electronically.

How Can I Get a Business eCheck Merchant Account?

A merchant account for an eCheck or ACH can be opened similarly to one for a credit card. You’ll usually have to give information like:

  • Taxpayer Identification Number (EIN).
  • Years in the industry.
  • Processing quantities are estimated.
  • Other information to confirm your company’s position.

These details will be examined by the merchant account provider or payment processor to determine acceptability. Approval might take just a few days. Use our easy alphabetized guide to discover more about merchant accounts.

Q&A about eCheck

What is the distinction between eChecks and credit card transactions?

ECheck processing is not the same as credit card processing.

The main distinction is that eCheck transfers funds via ACH rather than card networks, resulting in lower processing fees.

For eCheck acceptance, there are no credit card interchange fees, and fees can be as low as ten cents per transaction. This can make a significant difference for companies that accept large or recurring payments.

How does an eCheck work?

An eCheck, also known as an electronic check, functions as a digital adaptation of the conventional paper check. It operates by electronically deducting money from the payer’s checking account, then transferring it over the ACH network, and finally depositing it into the payee’s checking account.

What is the difference between eChecks and EFT and wire transfer?

EFT is an abbreviation for electronic funds transfer. It is an umbrella word for several forms of electronic payments such as eCheck, ACH transfer, wire transfer, PayPal payments, direct deposit, SEPA payments, local bank transfers, and eWallets. Essentially, eChecks and ACH are forms of EFT, but not all EFT transactions are eChecks and ACH.
Wire transfers transfer funds from one bank account to another. Unlike ACH transactions, which are done in batches, wire transfers are done one at a time. As a result, wire transfers are more expensive than ACH transactions. Another notable distinction is that, unlike ACH, wire transfers cannot be reversed once launched, making them less secure than ACH.

Can accepting eChecks help a business gain revenue?

Because checking account numbers seldom change as frequently as credit card numbers, there is less possibility of payment breakage with eCheck payments.
While accepting eChecks may benefit any sort of business, the payment method is particularly well suited to the following:

Businesses that are subscription-based

eChecks enable recurring payments, autopay, and auto-renewal straightforward and convenient for businesses and their consumers, from music to memberships to magazine subscriptions.
Any company that operates on a subscription-based basis, whether it is an online tea-of-the-month club or a health club with monthly fees, should consider accepting electronic check payments.

Online companies

A company can offer a product to a consumer once and receive monthly payments for years. It’s the most efficient sales technique available, and it’s been expanding online in recent years.

Companies that take huge payments

With ACH transferring funds for eChecks, banks communicate directly with one another. Businesses save money by avoiding interchange fees by removing the middlemen engaged in credit card payment processing.
If your company routinely processes payments in the hundreds or thousands of dollars, taking electronic check payments might save you a lot of money.

Is it time to include eChecks in your company’s payment options?

The greater the number of payment alternatives available to a consumer, the more likely they are to spend their money and return to the firm. Accepting eChecks automatically increases a company’s revenue potential.
Speak with your bank and payment processor to learn more about electronic check payment processing.
They can advise you on whether now is the best moment to add eChecks into your payment mix and how to make the most of this payment method.

Overall, we hope you found this article on What Is an E-Check to be informative. Gain knowledge more about banking, which HDBank Career keeps up to date.

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