An electronic check allows someone to debit a payer’s bank account without a physical check. It reduces payment processing time and is becoming popular with consumers and retailers. However, it eliminates the ability to “float” checks and raises concerns about fraud.
An electronic check, also known as an electronic check, is a device by which someone to whom money is owed can debit the payer’s bank account without actually having a physical check in hand. This can create convenience for both payer and receiver, depending on the situation. An electronic check can also reduce the time it takes to process a payment.
Although it may be confusing for some to think about how electronic check processing works, it is actually a very simple process. There are three very important pieces of information on a check every time a check is written. The first is the routing number, which shows the bank where the account is located. The second is the account number itself, which indicates the account from which the funds will be withdrawn. The third piece of information is the quantity. While there is other information on a check, such as the date, name, and address of the account holder, this is non-critical information.
Once authorization to process an electronic check payment has been obtained, those three critical pieces of information are taken and processed. The recipient’s bank will usually contact the payer’s bank with the appropriate information, at which time the payer’s bank will honor the transaction, provided it believes that no fraud is being committed and that there are sufficient funds in the account. Once complete, the receiver can store the account and routing number for future reference or delete the information.
Electronic checks are becoming very popular, especially as consumers, introduced to expedited payments through debit card transactions, have become more technology-savvy when conducting simple business transactions. It is popular with recipients simply because they get their money substantially faster than they would through traditional means. In the past, a payer would have to send a personal check, which would then travel to a processing center. Once there, it would be deposited for payment and credited. It then likely travels back to the payer’s bank, before the payment is made to the receiver’s bank. This process can take a week or more.
Retailers are also increasingly turning to electronic checks as a way to provide customers with another payment option. In the past, retailers have always taken a risk when accepting a check. In some cases, that risk was determined to be too great and the retailer stopped accepting personal checks. Now, with electronic check processing, the retailer can instantly find out if there are enough funds in the account to cover a transaction.
However, the electronic verification method also has some criticisms. Consumers can no longer “float” checks. This involves writing a check on an account that currently does not have sufficient funds, but is expected to have sufficient funds by the time the check clears. Additionally, some are concerned that electronic checks could increase the potential for fraud. In reality, an electronic check does not give the recipient any more information than a traditional check would, and in some cases it may even give them less.
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