With our world becoming more and more digital, I’m sure you have come across the word ‘eCheck’? Not exactly sure what it is or how they work? We have you covered with everything you need to know about eCheck payment processing rates, transaction times, and more.
What is an eCheck?
An eCheck is essentially a digital version of a paper check. The same information found on a paper check (i.e., business name, bank account number, and bank routing number) is used to transfer a payment from one bank to another, digitally.
An eCheck, also commonly known as an electronic check, online check, and internet check are great for businesses that are looking to save time, money, and waste.
How it works
The purpose of electronic checks is to provide a simple and convenient way to accept payments. This electronic process is streamlined into four simple steps:
- Charge the Customer
The customer provides their bank account information (bank routing number and account number) for processing. Using the customer’s bank account information, an electronic request is made to charge the customer in the amount of the purchase.
- Request Authorization
The customer must authorize the amount requested by the recipient in order to withdrawl from their account. Payments are granted approval through signed order forms, recorded voice approval, or online payment forms.
- Processing
Once the customer has authorized the payment, the customer’s bank and the payment processor communicate to verify that the submitted information is accurate. If correct, the transaction is officially submitted and enters the ACH (automated clearing house) system to begin the eCheck transaction process.
Read about Payline’s ACH payment strategy if your business accepts eChecks.
- Deposit Fund/Payment Confirmation
Lastly, the eCheck transaction amount is withdrawn from the customer’s checking account and deposited into the recipient’s bank account. Funds are typically deposited in the recipients bank account within three to five business days after the transaction is initiated. Both parties should then receive confirmation of the transaction and the eCheck transaction is complete!
Traditional Paper Check vs eCheck
Some individuals and businesses aren’t ready to trust online financing and some individuals simply don’t have access to the internet. In their case, using a traditional paper check is still common practice. Paper checks provide one’s bank account, routing number, check number, and a signature that endorses the check. Traditional checks are great, but they can be easily misplaced, processing takes longer, and are at greater risk for fraud concerns.
Conversely, with an eCheck, customers provide payment information through an electronic check authorization form. Here, money is electronically withdrawn from the payer’s checking account, transferred over an ACH network, and finally deposited into the payee’s checking account. eChecks are great because they offer low transaction fees, recurring payments are easy to manage, and you can pay any time from anywhere.
Benefits & Drawbacks of eChecks
To be completely transparent, it’s important that you know the benefits and drawbacks of using eChecks. I noted a few above, but here is an in-depth explanation.
Benefits to eChecks
- You Have Control
Pay when you want! It’s your money, so pay your vendors exactly when you want to pay them. eChecks give you the power to pay in 4 to 5 seconds, so there’s no having to worry about when, or if, your payment will arrive.
- Cost Savings
Bank of America reports that it costs anywhere between $4 and $20 on average to process a paper check; one has to consider the paper check itself, envelopes, stamps, and your time. An eCheck on the other hand is typically a low, flat fee that can range from roughly $0.30 to $1.50, instead of a percent cost like most transaction fees. Simply, create a check and send it in just a few clicks from a computer, smartphone, or tablet.
- Security and Safety
eChecks use the same security system that makes direct deposits and payment possible. You can relax knowing that your money is in the hands of the best digital eyes. Electronic checks are safe in part of their level of security through their authentication process, duplication detection, encryption, and digital signatures.
Drawbacks to eChecks
- Slow Clearing Time
Getting the customer authorization for an eCheck is slightly more complicated than simply swiping a card. Once you deposit an eCheck, there is a three-to-five business days wait period before the funds arrive in your account. However, it is still faster than a paper check!
- No Weekend or Holiday Processing
Since the electronic check process involves financial institutions, which typically only operate on business days and non-holidays, an eCheck will not be authorized on those days. It is best to process an eCheck on Monday or Tuesday to see your funds by Thursday or Friday. Conversely, if you deposit an eCheck on a Friday, you may have to wait a week before the funds become available.
- eChecks can Bounce
It’s important to know that electronic checks can bounce. If funds are not available in the buyer’s account when the eCheck is processed, it will be declined. If you encounter a bounced digital check, contact the business you paid to see if there are any fees or penalties for your bounced echeck.
When to Use eChecks?
In general, accepting eChecks are great for any business, but they are best suited for the following payments.
eCommerce merchants
Since eChecks are linked with one’s checking number, it’s less likely to change compared to a debit or credit card number. For recurring transactions, like subscriptions or monthly payments, this is ideal as there is less likelihood of payment breakage.
Businesses that take large payments
Fees on credit card payments can be as high as 3.5%. Since payments rely on ACH processing to move the funds for eChecks, banks are communicating directly with each other. When the credit card middleman is cut from the process, one avoids the interchange fees. For example, processing fees for a $10,000 eCheck payment will cost you less than a cup of coffee. Conversely, the processing fees for a $10,000 credit card payment could set you back over $350. Quickbooks estimates that eCheck payments can reduce processing fees by as much as 60%.
Nonprofit Organizations
Keep donations running! Without a steady stream of charitable giving, you can’t continue to work towards your mission. A nonprofit organization can maximize donations by using low-cost eChecks to allow for recurring donations and maintain low transaction fees.
Payline as your eCheck Partner
The process may take time, but at Payline, we’re here to help. Payline helps over 25,000 businesses accept payments, so as your eCommerce payment partner, Payline will integrate your systems with our ACH gateway.
Our highly-trained representatives are always ready to provide support whenever you need it. Speak with our representatives today and see how we can make a difference with eCheck payment processing!
