eChecks: What They Are And How They Work

Dec 07, 2021

Banks have always processed checks manually and deposited the funds into the user’s bank. It would typically take days for the funds to appear on and be ready to use in that account. 

Thankfully, technology has made vast improvements that have allowed for these payments to be carried out electronically from an individual’s checking account. This is done by using the eCheck payment method.  

What Is An eCheck?

An eCheck, also known as an electronic check, is a “digital” version of a paper check. By using an eCheck, funds are electronically withdrawn from the payer’s checking account, transferred via the ACH network, and ultimately deposited into the payee’s checking account. 

These payments are made possible by the “Automated Clearing House” or the (ACH) network. This is an electronic network that is used by financial institutions in the U.S.

By using an ACH merchant account, a business is able to withdraw payments for goods and services directly from their customer’s bank account. The payment, however, must be authorized by the customer, either by signing a contract, accepting the website’s “Terms and Conditions”, or via a recorded voice conversation. 

How Do They Work?

The key difference between electronic check processing and paper check processing is that eChecks are faster. With an eCheck, a customer does not have to manually fill out a paper check and send it to a business for payment. The entire process occurs electronically. It not only saves time, but it also saves on paper waste.

These are the steps involved in processing an eCheck:

1. Authorization is requested

Before processing a transaction, the business must request authorization from the customer. This can be accomplished through an online payment form, a signed order form, or using a recorded phone conversation. 

2. Setting Up Payment

After the authorization has taken place, the business enters the payment information into the online payment processing software. If the payment is on a recurrent schedule, the information also provides details of that recurrent payment schedule. 

3. Payment is finalized and submitted

Once all the information is accurately entered into the payment software, the business will need to click “Save” or “Submit” to initiate the ACH transaction process. 

4. Deposit funds

Here, the payment is then instantly withdrawn from the customer’s bank account. The online software then sends a payment receipt to the customer. Finally, the payment is deposited into the business’ bank account. Typically, the funds are deposited into the merchant’s bank account between three to five business days after the transaction started. 

What Is Needed For eCheck Processing?

Before a merchant can begin accepting eChecks, the “payee” or the merchant must have a registered ACH merchant account set up. This allows the business to accept electronic payments. Setting it up is relatively easy and you only need the following information:

  • Business name and address
  • Federal Tax ID number
  • Transaction processing volumes
  • Years in business
  • Bank account details

In turn, the customer must also submit the same information that would be found on a paper check:

  • Checking account number
  • The bank’s routing number
  • The payment amount

Finally, a customer must authorize the payment, either online or over a recorded phone call.

What Are The Benefits Of eChecks?

Since the transaction is completed entirely online, eChecks are processed faster in comparison to paper checks. They also greatly reduce paper waste. 

eCheck processing fees are also considerably lower than credit card fees. Your best bet is to compare processing fees thoroughly before deciding on the best type of payment as it will largely depend on your business type and location.

Electronic Checks Are Convenient

It is a known fact that the more payment options customers have, the more likely they are to return to a business and become repeat, if not loyal customers.

By accepting eChecks, a business is expanding its potential for increased revenue. 

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.