ELECTRONIC FUNDS TRANSFER

EFT or the electronic funds transfer is a system based entirely on computers, which is used for making financial operations via electronic means. In other words, it is simple a way of transferring cash with the use of an Automated Clearing House or ACH. An ACH is a body tied to the Federal Reserve Banks, and enables automated transfer of cash with EFT. This is the only type of process that can be used by a merchant that will give him the right to take his payment directly from the customer’s bank, and also use it to make transfer of money out for bill payments.

EFT has one very important feature, which is very beneficial to the merchant. This is the fact that when you make an EFT transfer, the money due is transferred into your account automatically on the date it is due, as pure cash, and not as an uncollected fund. Therefore, it enables the merchant to have actual cash in hand on the due date, than having to wait few days as in the case of normal transactions. Plus, an added advantage is that the conventional methods used for cash transfer and payments cost much more than the EFT process, thus you end up saving on money as well. This is due to the other ways involving the collection of bills, making of statements, mailing, postage charges, employee payments etc. 

EFT charges depend solely upon the total amount of transactions that are carried out, irrespective of the size of the dollar at the time, and such costs become almost negligible when you have a large volume of transactions. Also, apart from its very low transaction rates, the charges that you have to pay if checks bounce are also lesser than normal transactions.

The EFT process can be done only by the banks, financial corporations and card associations. And these agencies must have a pre-requisite of a bank guarantee to go ahead with such transfers. Companies that use websites, firms with service in future times, and also membership firms like health clubs, insurance, subscription companies and loan companies are best suited to use the EFT method.

The term EFT comprises many smaller transaction types, which are listed as below: -

• Direct deposit – involves payments on payrolls from the business to employees
• Direct debit – payments made by the customer, to the business, and transactions begin only with the customers prior permission
• Electronic benefit transfer
• Wire transfers – usually through an international banking network.
• Transactions using the stored value money, normally using private currency
• Cardholder transactions – started by the cardholder using a payment card

EFT services also include a variety of transaction types, such as – sales, refunds, withdrawal, cashback, deposits, payments, enquiry, administration, mini-statement, inter-account transfers, etc. Another very important fact when it comes to the EFT method is that it needs the consent of a number of parties in order for it to go through. When it is being n\made through the merchant, the transaction goes through an acquirer, then to a lot of channels, to the issuer, and finally to the cardholders account itself.

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