Do you know what EFT stands for? This article will provide you with all of the information you need to understand EFT’s meaning.
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Kevin
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January 17, 2022
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Common Questions
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What Does EFT Mean?
If you run a small business, you likely make payments to contractors, suppliers, vendors, and employees all the time. These types of payments were often made with checks or physical money in the past.
However, modern electronic payments provide a much faster, safer, and more efficient option. That’s where EFTs come in — but what does this acronym stand for?
According to the Merriam-Webster dictionary, EFT is an abbreviation for electronic funds transfer. It refers to a system used to move money from one account to another. As the name suggests, an EFT transaction is digital, and the two accounts can belong to the same bank or two different financial institutions.
What Type of Electronic Payment Is an EFT?
EFT does not refer to a specific type of payment. The acronym is more of an umbrella term that covers a broad spectrum of electronic payments, including:
- Direct deposit. With this type of EFT payment, funds go directly into an account with little to no paperwork. Also called ACH transfer or ACH payments, this favorable method allows employers (the sender) to directly pay an employee (the recipient) electronically in their bank account.
- Direct debit. This transaction is a type of recurring payment established by the payer, in which the agreed monthly payment automatically transfers to the payee’s account. Direct debit is most often used for paying monthly subscriptions.
- Electronic Checks. Also known as e-checks, this type of electronic funds transfer is similar to traditional paper checks, but it is entirely electronic. You simply need to enter your bank account number and routing number to make a payment.
- Wire Transfers. Typically used to send larger sums of money, such as a down payment on real estate, wire transfers allow funds to be moved quickly and securely without the need to exchange physical cash.
- ATMs. This type of electronic payment is made using an automated teller machine (ATM) kiosk. It lets you withdraw cash, make deposits, or transfer funds between accounts without having to go inside of the bank to speak with a teller.
- Mobile Wallets or Banking By Phone. This EFT payment provides a convenient way to pay bills, transfer money between accounts, or receive payments over the phone. Also known as an e-wallet or digital wallet, a mobile wallet is a digital storage space for credit and debit. It lets you make purchases using a mobile smart device rather than a physical card or cash.
The Benefits of EFT Payment Processing
Not only does EFT payment processing offer an economical way to save time and money, but it also offers businesses the following benefits as well.
- No postage to be paid for any form of billing service
- Easy to track transactions
- Fully Encrypted and safe SSL 128-bit information
- A steady decrease in check cashing costs
How Long Does it Take To Process an EFT Payment?
If you compare the EFT processing system to the once-standard system of printing and mailing checks, the EFT process is the clear winner and is more secure and practical. Generally speaking, most EFT payments are settled the very next business day.
However, if you plan to make an international transaction using the EFT payment system, it may take longer. The same can be said if you intend to make a high-value transaction (any transaction over 25,000 dollars). Additionally, during the holidays and, of course, on weekends, the time for your EFT payments will likely take to process may increase.
Typically EFT payments can only be processed on business days; cut-off hours will also apply. For example, if you make a payment after 11 PM, it may take up to a day longer for your payment to clear.
Can You Stop an EFT Payment?
For the most part, once payment initiates, it can’t be canceled. According to the EFTA, you have no right to do so. If a transaction needs to be refunded or stopped, that is solely between you and the recipient.
You may, however, be able to stop your recurring EFT payments (items like your scheduled motor vehicle EFTs). To stop these upcoming and scheduled payments, you must notify your financial institute at a minimum of three days prior to the processing of your next scheduled Electronic Funds Transfer.
Additionally, your state may also have additional regulations on top of the policies your financial institute may already have in place in regards to stopping your recurring and scheduled EFTs. To avoid having your stop void, you must always follow your financial institutes’ as well as your state guidelines for stopping scheduled Electronic Funds Transfers.
Are There EFT Payment Regulations?
The EFTA or Electronic Funds Transfer Act allows the government to monitor EFT payment compliance. The EFTA covers a broad spectrum of issues.
These issues include the disclosure of customer information and clarification, error resolution, tax payments, record retention, and consumer liability. If a financial institution or bank breaks any of the long-established laws set in place by the EFTA, the consumer can sue for any damages.
A quick example would be if the consumer reported to their financial institution that their debit card was stolen or checking account information was hacked. In this case, if the bank does not prevent a transfer from being made, the consumer may be entitled to compensation.
Alternate Names of Electronic Fund Transactions
EFT transactions are known by a variety of different names across the globe. The same goes for various payment systems. Below are a few examples of these names:
- “Electronic Checks” or “E-Checks” (United States)
- “Bank Transfer or “Bank Payment” (United Kingdom)
- “E-Transfer” (Canda)
- “Giro Transfer” (Multiple European Countries)
Overall, Electronic Funds Transactions help business owners, both small and large. EFTs make it easier to make payments electronically to contractors, vendors, employers, and suppliers at virtually anytime — all while using a more secure, substantially faster, and oftentimes cheaper service than the traditional check or physical payment method.
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