What is an eCheck?

Quick insights

• Short for “electronic check,” an eCheck is a digital payment method that may be useful in several situations.
• An eCheck is a payment made directly from an individual’s checking account, but the payment is carried out digitally.
• An eCheck is one of several types of electronic funds transfers (EFTs) available through online banking.

An eCheck is a digital payment method that may be useful in several situations. With the help of technology, online payment processing is convenient whether you need it for personal or business reasons.

eCheck vs. paper check

Paper checks and eChecks are almost the same in terms of the information needed to process a payment. Typically, a paper check has your name, bank account number and routing number. An eCheck will require you to enter that information manually before it is submitted. In both cases, you’ll have to enter the amount and the payee’s name.

How does an eCheck work?

An eCheck goes through several steps for money to get from the payer to the payee. First, the payer creates the eCheck on a digital platform by entering key personal and financial information. After the payer authorizes the eCheck, money is drawn from their bank account, transferred through the automated clearing house (ACH) network, then deposited into the payee’s account.

Examples of when you could use an eCheck

There are several instances where you can use an eCheck, whether it’s for recurring or one-time payments:

• Mortgage payments
• Monthly rent payments
• Car loan repayments
• Membership fees
• Tax payments
• Credit card payments
• Utility payments

You may find an eCheck form offered as a payment option either on a company’s website or your bank’s online Bill Pay portal.

Are eChecks safe?

An eCheck is generally safer than a paper check. The risk is diminished by the check being in digital form and therefore unable to be misplaced. Additionally, fewer individuals are involved in processing an eCheck, limiting who can view your personal and financial details.

Pros and cons of eChecks

There are several benefits and potential downsides of using an eCheck.

Pros

• Can be used for a variety of transactions, including both one-time and recurring payments
• Offered through many websites and banking portals
• Can be sent internationally in some cases

Cons

• May not be offered or accepted by certain institutions
• Cannot be physically mailed or delivered
• May be subject to fees
• Could be subject to a daily or monthly transaction limit

eCheck vs. other electronic fund transfers (EFTs)

An eCheck is a type of EFT, which is an exchange of money between bank accounts. For EFTs, the parties involved in processing the payments don’t handle paper checks or cash.

While there are some similarities, each type of EFT has its own uses and considerations.

• eCheck: One-time or recurring electronic payment used in place of a paper check. Generally processed 3 to 5 business days after issued.
• ACH Payment: Direct payment from one bank account to another, commonly used when transferring between different checking accounts. Processing this transaction through the ACH network typically takes two business days but may be expedited to one day.
• Debit: One-time payment charged to a checking account with a physical debit card or the card number, authorized instantly by a recipient for goods or services. Generally processed within a day.
• Wire transfer: One-time direct electronic money transfer between bank accounts—irreversible once initiated. Generally processed in 1 to 5 business days.
• Peer-to-peer payments: One-time payment between two individuals, generally through a mobile app, such as Zelle^®. Although processed quickly, sometimes a balance can be held in the app. The user can initiate a money transfer from an app balance to a linked account, which may take several days.

Final thoughts

An eCheck can be a convenient payment method for one-time and recurring payments. Individuals and businesses might use eChecks for an array of things, such as payments on websites or as a functional component of online banking portals. While eChecks are secure and convenient, they’re worth comparing with other EFT options depending on your situation.