Glossary

What is an Electronic Check (eCheck)?

As the world of eCommerce rose in the late 90s and early 2000s, consumers and businesses alike needed a way to securely and accurately make and receive digital payments. Banks simply applied all of the same rules and regulations that govern paper checks to electronic checks.

An electronic check is a means of making payments online through the internet or other network, designed to perform the same functions as a paper check. In fact, eCheck was the very first digitally based form of payment used by the U.S. Treasury. eChecks are considered a more convenient and secure alternative to paper checks, requiring less steps to create and process and leaving less openings for checks to be lost, stolen, or fraudulently adjusted.

Benefits of eChecks

The benefits of electronic checks are numerous. Electronic checks are capable of being protected by additional security measures such as multi-factor authentication, digital signatures, and multiple forms of digital encryption designed to keep hackers from gaining access to them. And have you ever taken careful measures to ensure that someone can't write in additional zeros or change information on a paper check you've written? This worry is eliminated with eChecks, which can't be changed or adjusted after they've already been issued to the recipient.

Not only are they more secure than their traditional counterparts, eChecks are less costly as well. As consumers aren't required to order checks, fill them out, and deliver them or mail them by hand, the costs associated with purchasing paper checks and postage are significantly reduced or eliminated. Furthermore, the average cost for electronic check processing is around $0.10, versus up to $1 for each paper check.

Lastly, eChecks are considerably faster than traditional paper checks. Not to mention that the sender no longer needs to fill out a physical check and the recipient won't have to go deposit the check, eCheck processing is also more swift thanks to its use of the ACH network.

What's the Difference Between an eCheck and ACH or EFT?

With various terms being used pertaining to electronic payments, it can be difficult to distinguish the difference between some of them. What is the difference between an eCheck and ACH or EFT? ACH, which stands for automated clearing house, is a network used by banks and financial institutions in the U.S. An ACH transfer is a funds transfer using this network and involves money being electronically withdrawn from the payer, sent through the ACH network to be cleared and deposited into the bank account of the recipient.

EFTs, or electronic funds transfers, describe an entire category of payments that includes wire transfers, direct deposits, ATM deposits or withdrawals, electronic benefit payments, ACH disbursements, and more.

An eCheck is a type of EFT, using the check format in the digital environment to send and receive payments. Think of an eCheck as a car, the ACH network as the road it drives on, and EFT as the system of all other cars, trucks, and vehicles in the city.

What Can You Pay for with eChecks?

eChecks can be used for a wide range of online payments and purchases, and they can be used for larger recurring payments such as rent, mortgage, auto loan dues, and membership fees associated with gyms or clubs.

Most vendors accept eChecks as a valid payment method because it's necessary for doing business with larger customers. Sometimes even small businesses opt for eCheck transactions because they want to avoid large fees associated with debit or credit card payments. Since the payment processing fees for credit and debit cards can range from a small fixed amount to a percentage of the entire purchase, regardless of the total value, eChecks are sometimes a more viable and preferred payment option for the merchant.

Can I Set Up Recurring eCheck Payments?

The use of eChecks for recurring payments is relatively commonplace. They can be used to create automatic recurring payments for everything from rent and mortgages to other large, monthly, or semi-regular purchases. Sometimes, recurring payments made via eChecks will be referred to as 'recurring ACH payments.'

Processing Times for eChecks

While processing times for eCheck payments vary, they generally range between 3 to 5 business days. Within this time period, the funds will be verified as being available, cleared by the ACH, and then deposited and made available within the recipient's account, where they can be used to make purchases and be withdrawn.

How to Send an eCheck

There are generally two ways to send an eCheck.

The first method is to receive an online payment form from the recipient where you'll fill in details like your checking account numberbank routing number, and amount of payment. You then submit the payment to the payee, authorizing the withdrawal of the amount specified from your checking account.

eChecks can also be generated and processed online, where the payee will use an (usually) automated process for inputting the payment information as well their bank account information. They then can authorize the payments to the recipient.

How to Set Up eChecks for Businesses

Requesting and accepting eChecks requires an ACH merchant account, which is similar to the credit card merchant accounts set up by many businesses. Once your business chooses a merchant account provider, you'll need to provide your Federal Tax ID, estimated processing volume (how many checks you expect to process each month/year), and how many years you've been in business. Once approved, usually, in a few days, you can begin requesting and receiving eCheck payments.

See how Bill.com can help your business with a risk-free trial

Bill.com makes it easy for business owners to pay with ACH payments with low processing fees. The online payment gateway allows payers to input their payment information in a secure portal, providing added security. Bill.com also makes it easier to send bills and automatically track payments whether customers use ACH transactions or other types of payments. In addition, everything syncs up with your accounting software, so you save time on bookkeeping as well. Start your risk-free trial today.


The content found here is for informational purposes only, and not for the purpose of providing advice, including but not limited to, financial, legal, or tax advice. Any opinion found here does not necessarily represent those of Bill.com.

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