An electronic check, or eCheck for short, is a digital version of a traditional paper check. It allows money to be transferred directly from a customer’s bank account to a recipient’s bank account using the Automated Clearing House (ACH) network.
Paying with an eCheck is similar to using a traditional check, but the process is completely electronic. The customer provides their bank routing number, checking account number, and payment authorization.
How eChecks Are Processed
Processing eChecks is faster and more convenient than traditional paper checks. eChecks are securely processed electronically through the ACH network, an electronic system used to transfer funds between banks in the United States.
- Customer Authorization: The customer authorizes the payment by providing their bank account details, including the account and routing numbers. Authorization can be made through an online payment form, over the phone, or via paper authorization. This gives the business permission to debit their account.
- Payment Initiation: The business, using a payment processor or eCheck service provider, initiates the eCheck transaction by submitting the customer’s bank information to the ACH network. The payment details are encrypted for security during transmission.
- Processing: The bank verifies the account is valid. Some systems may also check for available funds, though this depends on the provider.
- Transfer: Once the transaction is verified, the eCheck request is sent to the ACH network, which communicates the debit instruction to the customer’s bank and credits the receiving business’s bank. The funds are electronically transferred from the payer’s account to the recipient’s account.
- Clearing and Settlement: The funds are transferred from the customer’s bank to the business’s bank. This process typically takes 3 to 5 business days, depending on the banks and the specific ACH processing schedule.
Benefits of Accepting eChecks
Accepting eChecks can provide several benefits for businesses, especially those who have high transaction volumes or recurring payments. By accepting eChecks as a payment method, you also have the following advantages:
- Lower processing costs compared to credit card transactions
- Faster processing and more secure compared to traditional paper checks
- Convenience through eliminating manual payment processing
- Improved cash flow thanks to faster clearing times
- Accessible to a wide range of customers
- Lower risk of chargebacks
eCheck vs Other Payment Methods
eChecks share some similarities with other electronic payment methods, but there are some key differences.
ACH
eChecks are one of several types of ACH transfer, which also includes transactions such as direct deposits, bill payments, and business-to-business transfers. The main distinction between the two is that eChecks are specifically designed to replicate paper checks in digital form.
Both are secure and cost-effective, but ACH transfers offer more flexibility and are used in payroll, vendor payments, and other automated financial transactions, making them suitable for a broader range of business needs.
Wire Transfer
eChecks and wire transfers differ in terms of speed, cost, and purpose. eChecks, processed via the ACH network, take 3-5 business days to settle and are a low-cost solution ideal for recurring payments or large, domestic transactions.
Wire transfers are typically used for high-value or urgent payments because they process within the same day, but they come with higher fees. Wire transfers are preferred when speed is critical, like in real estate or international transactions, where quick settlement and guaranteed fund availability are essential.
EFT
eChecks are a specific type of EFT (Electronic Funds Transfer), which is a broad category of any electronic transaction moving money between bank accounts. EFT includes not just eChecks but also direct deposits, ATM transactions, credit card payments, and wire transfers.
Paper Checks
eChecks and paper checks serve the same basic function—transferring funds from one account to another. Unlike paper checks, which require physical handling, mailing, and manual processing, eChecks are fully electronic. eChecks clear faster, typically within 3-5 business days and include encryption and verification measures, reducing fraud risks. Accepting eChecks allows businesses to automate payments, reducing manual errors and administrative costs.
Accepting eChecks With HealPay
Merchants with a valid merchant account can easily accept eChecks through HealPay’s versatile payment solutions, including PORTAL, IVR, and V-TERM. Each option offers flexibility and convenience for businesses looking to streamline their payment processes and provide customers with a seamless experience.
To open a merchant account, you’ll need to provide your:
- Business information including your legal business name and address
- Tax ID number
- Business bank account and voided business check
- Owner information including name and address
- Estimated monthly transaction details and processing history, if applicable
Go Beyond Basic Payment Processing
eCheck FAQS
Can eChecks be refunded?
Yes, eChecks can be refunded, but the process differs slightly from credit card refunds. Because eChecks are processed through the ACH network, refunds generally take 3-5 business days to complete. This time is similar to the original settlement time for the eCheck itself.
If the eCheck has not yet been fully processed, some payment processors may allow a reversal of the transaction before the funds clear. Otherwise, you may have to wait for the original transaction to settle before initiating a refund. Once the eCheck has cleared, a refund can still be issued, but it must be processed as a separate transaction.
Then, to refund an eCheck, the business initiates a new ACH transaction to transfer the refunded amount back to the customer’s bank account. This requires authorization and proper handling by the payment processor.
Do eChecks process on the weekends?
No, eChecks generally do not process on weekends or bank holidays, since they’re processed through the ACH network, which operates on business days—typically Monday through Friday, excluding federal holidays.
If an eCheck payment is submitted on a weekend or Friday after business hours, the transaction will not begin processing until the next business day, usually Monday.
While some ACH transfers are eligible for same-day processing on business days, this still does not apply to weekends.
How long does it take an eCheck to clear?
It generally takes 3-5 business days for an eCheck to clear. Some transfers can be completed faster through same-day ACH transfers.
Can eChecks bounce?
Yes, eChecks can bounce, similar to traditional paper checks. An eCheck will “bounce” if the payer’s bank account doesn’t have sufficient funds to cover the payment, the account is frozen or closed, or incorrect account information was provided. The payer can issue a stop payment on the eCheck, which can also prevent the transaction from being completed.
When an eCheck bounces, the payer may be subject to Non-Sufficient Funds (NSF) fees from their bank. Businesses may also incur a failed transaction fee from their bank or payment processor.
Are eChecks safe?
Yes, eChecks are generally safe, as they use advanced security measures to protect both the payer and the business. Businesses should be sure to choose a payment platform that uses key safety features—like encryption, tokenization, and secure customer authentication—to ensure secure transactions and protect sensitive customer information.
