What Is an eCheck?

Since the early 2000s, digital payment methods have gradually become the norm as the use of cash and paper checks continues to lag. One of these newer digital payment methods is the electronic check, or eCheck. An eCheck is essentially a digital version of a paper check, containing the same information but handled digitally. This makes eChecks more efficient and secure. You’ve likely used eChecks when paying bills online, sending money to friends, or receiving paychecks from your employer.

What Are the Benefits of Using an eCheck?

There are multiple benefits to using an eCheck over other forms of payments. Some of these upsides include:

• Low Cost: Electronic checks are usually free to initiate, while other payment methods, such as wire transfers, may cost around $20 or more.
• Speed: It’s possible to send same-day eChecks or have the funds clear within two business days, which may be quicker compared to paper checks and money orders.
• Security: When you initiate an ACH transaction as an eCheck, you must authorize payment. The transaction is also encrypted and may be reversible in some cases.

How to Use an eCheck

The steps you’d take to use an eCheck depend on what you’re trying to do. Here’s a breakdown of the basic steps involved for the main eCheck options:

Pay a Bill

You’ll typically log in to your account on the service provider’s website, choose the “make a payment” option, and enter your account number and routing number. You may authorize a one-time debit or recurring payments.

Send a Peer-to-Peer Payment

After choosing a P2P service and creating an account, you may link it to your checking account. From here, you’ll need the recipient’s username or other information to send them a payment.

Receive Direct Deposit

Depending on your employer’s rules, you may need to sign a payroll authorization document or log in to an online account and set up your direct deposit there. Some banks can provide you with a prefilled direct deposit form with your routing number, account number, and account type.

Online Bank Transfer

The process may vary with each bank, but you can usually log in to your online bank account and find the ACH transfer option. If you’re sending money to a person or business for the first time, you’ll typically need to plug in the recipient’s name, address, account number, routing number, and account type. You may also need to verify your own identity for security purposes.

How Do eChecks Differ From Other Payment Methods?

Electronic checks differ from other payment methods in several ways. Wire transfers, for example, move directly from one bank account to the recipient immediately, so they cost more to initiate. It’s also not possible to reverse a wire payment.

Electronic checks also differ from credit card payments, which move through a private card network and can be vulnerable to some payment scams.

Downsides of Using eChecks

Some eChecks take longer to process, so you may have to wait a few days for funds to clear. And while eChecks come with several security features, scammers may attempt to trick you into sending them money.

The Bottom Line

Electronic checks come with several benefits, including convenience, speed, and security. Sending or receiving an eCheck requires you to first have a bank account.

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