With most people having access to the internet through computers and mobile devices, it has become very easy to send money electronically. An electronic funds transfer (EFT) is a transfer of money that is completed through a computer network. You can use the funds to buy things, pay bills, send money to other people, and pay employees. If you have ever used online banking to transfer money or used an application on your phone to send money to someone, then you have used electronic funds transfers.
For an EFT to work, you need one party who is sending the money from a checking account and another party who is going to receive the money into a checking account. When the sender sends the money, it goes through electronic networks and is received by the other party. The main advantage of using EFTs is that the payments are almost instant. You do not have to wait for a check to be sent and then deposited. This saves time. Because they work the same as checks with money coming in and out of your checking account, you should include EFTs as transactions in your check register. Just like with credit card transactions, you have certain protections with EFTs through the Electronic Funds Transfer Act. You have 60 days to report unauthorized transactions. Look at the table below to see different types of electronic funds transfers. Click on the type of EFT in Column 1 to learn a little more about each type.
Electronic checks are virtual checks sent electronically with your checking account information. They work just like regular paper checks. |
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A direct deposit is made when you authorize your place of work to deposit your paycheck directly into your account. |
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You can pay a bill over the phone using your bank account information. |
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You can use the ATM terminal at a bank to make transactions, including depositing or withdrawing money from the ATM or transferring money between accounts. |
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You can use your debit card to make a purchase in person or online. The money comes out of your account electronically. |
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You can use your bank account information to make a payment over the internet. When you go to a website to pay a bill, you are making an internet transaction. |
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When you use an application on your phone or on the internet to directly send a payment to someone else, this is a peer-to-peer electronic payment. Think of the many applications that are now available to send payments to someone. |
Level Up!
Now that you see the different types of electronic funds transfers that come out of checking accounts, which of the following is the BEST example of an EFT?
