What Is an eCheck? Everything You Need To Know

Payment Processing
Whether you’re stumped by a customer asking to pay with an eCheck or you’re just looking to increase the ways in which your customers can pay you, an eCheck is about as straightforward as many other types of electronic payments. Practically, they’re an easier version of those old physical checks — paper notes that would spell out (literally) the amount owed and allow for a transfer of money from the payee’s bank account to yours. But because traditional paper checks have to be filled out for an exact amount at purchase time, they’re typically only used today for paying bills and other recurring purchases by mail. But because checks don’t really work online or in the digital world, most people today use credit and debit cards that are much quicker and easier to use. But the eCheck provides another way to do that.

What Is an eCheck?

In a nutshell, an eCheck, or electronic check, is basically a digital version of a paper check. Just like a traditional check, money is withdrawn from the customer’s account and deposited in the payee’s account. The piece that makes it all happen is the automated clearing house, or ACH, which is a payment network that provides a mechanism for payment processing. An ACH merchant account gives businesses the ability to withdraw payments directly from a customer’s bank account, provided that the customer has authorized the payment. Payment authorization can occur either via a signed contract, an oral approval or via terms spelled out on a website or app.

How Do eChecks Work?

Once you know what an eCheck is, the most common follow-up question is: How do eChecks work? Thankfully, they don’t work like paper checks that must be manually filled out and handed or mailed to a business for processing. Instead, with an eCheck you get the speed and convenience of digital processing methods, which greatly speeds up the processing time and ease of using and accepting eChecks, as well as cutting down on paper waste. Processing an eCheck is a four-part process: First, a request authorization is needed. This is to protect customers from random charges for services and goods they never signed up for. An authorization can occur via a website or app, as well as via a signed order form or over the phone. Next up is the payment set-up. Following the authorization, payment details are entered into a payment processing software suite, including any recurring payment information such as when the next billing occurs and when the payments will end. The third step in eCheck processing is to finalize and submit the payment. With the payment details in order, all that’s left is for the business to submit or process the payment. That will kick off the ACH process, then it’s on to the waiting period. The last step is the depositing of funds, which are automatically withdrawn from the payer’s bank account and deposited into the payee’s bank account. The deposit process usually takes three to five business days following the initiation of the transaction.

How Do eChecks Differ From ACH and EFT Payments?

If you know your basic geometry, you know that a square is a rectangle but a rectangle isn’t necessarily a square. And that’s sort of how electronic payments work. EFT means any type of electronic funds transfer, which includes wire transfers, direct deposits, electronic payments and ACH disbursements. Instead of being a payment method itself, ACH is the network upon which payments are made, though payments can be of various types.  Simply put, an eCheck is an EFT payment (though EFT payments aren’t necessarily eChecks) that utilizes the ACH network for processing. Chronologically, payments come out of the payer’s account and enter the ACH network. The ACH network contacts the payee’s bank and identifies the payee’s bank account for the final deposit. It’s similar to a traditional check, but it’s also significantly faster as most of the hold-ups with paper checks are removed.

What Types of Payments Are Possible With eChecks?

Essentially, as long as your business accepts eChecks, any customer that has a bank account can make a payment via an eCheck. The good news is that eCheck processing is cheaper than credit card processing, so you may even be able to save more money in fees by accepting eChecks. For larger payments such as mortgages and rent, as well as car payments, the savings can be greater since the fee is not attached to the total amount. 

What About Recurring Payments?

Overall, eChecks are actually the preferred payment method for recurring payments due to their low fees and the comprehensive support around recurring payments. In fact, recurring ACH and direct debit payments are actually the same thing as an eCheck payment.

What Is the Timeline for an eCheck To Clear?

Because eChecks depend on your bank, the customer’s bank and the ACH, eCheck clearing time varies. After authorization from your customer, transaction information is sent to the customer’s bank where it is verified and processed. Then the verified eCheck payment is sent to your bank and posted to your account. In all, it takes about three to five days to clear an eCheck payment, which includes verifying the funds in 24 to 48 hours after the initiation of payment. 

How To Accept eCheck Payments

Accepting eCheck payments is a relatively simple process provided you have the right processing capabilities in place. First, you’ll need an ACH merchant account, which is the fundamental mechanism that allows you to accept eCheck payments via the ACH network. Your customers will fill out an online payment form with their bank information including their account number and routing number, in addition to the final payment amount. Once they hit submit, you’ll have the authorization you need to withdraw the payment from your customer’s bank account directly into your account. Payments via eChecks are also possible in person and over the phone — just collect the customer’s checking account and routing numbers and input them into your online payment terminal. Once you complete the setup, the payment is initiated and after a few days you’ll see the amount in your account.

Leverage Transcend Pay for Your Payment Processing Needs

If you run a high-risk business or you’re just looking for an easier way to manage your payment processing, the right financial partner makes all the difference. Here at Transcend Pay, we’re able to offer flexible payment processing services to just about any business. With no reserve requirements, no escrow requirements and low transaction fees, we can help you up your payment processing game so that you can focus on growing your business. Learn more about our eCheck processing solutions.