Electronic Check Processing: The Ultimate Guide

Mar 23, 2022

There is no doubt that we are now living in a digital age, where online transactions are not only the norm but a necessary component to running an online business. Convenience and speed of transactions are of the essence. By offering both benefits, online businesses have a better chance at not only surviving the online retail landscape but thriving as well. 

This dramatic shift to virtual payments has meant that the demand for paper payments is dwindling. Because of this shift, one of the most popular online payment methods is continuing to grow in use, and that is the use of electronic checks, also known as eChecks.

What Is An eCheck?

eChecks are a digital version of a paper check that can be used to make a payment online or by using the Automated Clearing House (ACH) network. By using this network, eChecks provide an opportunity to transfer money between bank accounts without having to rely on credit card networks. 

Although eChecks generally fit in the standards and practices used within the current banking industry, certain, manual steps of getting paid are not only removed but the funds get deposited into your account faster. 

There are state-of-the-art security features that support eChecks and are fit to serve customers in small to medium-sized businesses. The use of eChecks works best in situations where a paper check would traditionally be used. 

How Do eChecks Work?

Since the entire process of accepting payments occurs electronically, it offers not only convenient but secure steps to make it happen:

1. Request authorization for the transaction

The customer who initiates the payment must permit the amount requested by the recipient to be withdrawn from his or her account. These payments can be authorized through a signed order form, recorded voice approval, or an online payment form.

2. Set the payment up

As soon as the customer authorizes the payment, the merchant will begin the payment process by entering the bank account information (checking account, routing number, etc.) into the online payment gateway.

3. Complete the transaction

After the financial information is received and verified by the payment gateway, the merchant “saves” and “submits” the payment to their bank. The payment is then sent to the ACH network to initiate the eCheck transaction process.

4. Confirm payment

Finally, the eCheck transaction amount is withdrawn from the customer’s checking account. It is then deposited into the business’s bank account. A payment confirmation receipt is ultimately sent to the customer.

There are many reasons why eChecks are growing in popularity, one of the most prominent reasons is convenience. You no longer have to make a trip to your local bank. 

What Are The Fees For Processing eChecks?

Like most processing of transactions, whether they occur in-person or online, there will be some fees involved. eChecks are definitely no exception. Processing rates will largely depend on the type of business, the provider, and other elements. However, they are generally lower than other types of payments. 

For eCheck transactions, rates can be flat or fixed that may fluctuate between zero to one percent of the total amount. The average fee for eChecks can be anywhere from $.30 to $1.50 for every transaction.

However, there may be other fees when it comes to setting up eChecks that you will need to be aware of:

  • Verification fees
  • Application fees
  • Monthly fees
  • Termination fees
  • Return and chargeback fees
  • Rental fees
  • High-risk fees

What Type Of Transactions Can eChecks Be Used For?

Another great benefit to using eChecks is that they can be used for an assortment of transactions and therefore offer a lot of flexibility for consumers and businesses. eChecks have become the most popular payment method for big-ticket purchases, one-time purchases, and recurring payments.

The most common uses for eCheck payments include:

  • Subscription-based services or membership plans
  • Credit card payments
  • Legal retainers
  • Financing and automatic payments or loan repayments
  • Mortgage or monthly rental payments

The Differences Between eChecks and Paper Checks

Paper checks and eChecks do seem to function in a similar way, however, there are important distinctions between the two payment methods. One of the most prominent is the fact that eChecks are primarily used for online transactions whereas paper checks are used exclusively for in-person transactions.

Here are more key distinctions between eChecks and paper checks:

  • eChecks go through the transaction process faster than paper checks since they require fewer steps
  • eChecks are more secure than paper checks since they have added security features (authentication, encryption, digital signature, etc.)
  • Paper checks are more vulnerable to human error or criminal activity (forgery, lost or stolen checks, etc.)
  • Paper checks involve more costs than eChecks (printing, mailing, handling, etc.)
  • eChecks have unlimited data storage capabilities, whereas paper checks force users to manually enter information if they want to keep records

It may seem that, as more payments are moving into the digital space and fewer customers are using paper checks, one can only assume that paper checks will soon become obsolete. 

However, this is actually not the case. Paper checks are still being used by many businesses in a variety of industries and customers still seem to be using them to make payments as well, such as for mortgage or rent checks. 

How Long Do eChecks Take To Clear?

Although eChecks are a lot faster to process than paper checks, they are not exactly faster than other forms of online payments.

When an eCheck is submitted, it will take the bank around 24 to 48 hours to verify the payment. Then, it takes about 3 to 5 business days in order for the ACH network to deduct the money from the customer’s bank account and deposit it into the merchant’s bank account. In the end, it could take up to 7 days for the merchant to ultimately receive their funds. 

The reason that eChecks take longer to process is that the ACH (Automated Clearing House) Network uses batch transfers instead of handling each transaction individually.

Accepting eChecks Are A Win-Win

In this rapidly changing, digital world, it helps to get on board and offer the best digital payment methods to facilitate payments for both your business and your customers. Plus, offering more payment methods means you stand to grow your customer base and your revenue. 

Let us help you get a high risk merchant account today!

Get Started

Award winning.

  • 2012
  • 2013
  • 2014
  • 2015
  • 2016

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.

Live Chat