Terminology is a must have in the banking world. The biggest term that has come around recently is Automated Clearing House, or ACH. This term has probably appeared on your bank statements as ACH processing. The question on everyone’s mind is: What exactly is ACH processing. Below is some basic information about it, and how it has changed the way banking is done.

ACH Processing is all about the electronic transfer of money from one place to another. The time it will take to get from one destination to another used to be depend completely upon mail. Not anymore. With everything going electronic, payments are instantaneous.

With Automated Clearing House, everything is done electronically. This means that paper checks are becoming a thing of the past. Credit and Debit cards are the main reason this type of processing has become so popular. It is much easier to send money electronically than it is to write out a check in today’s society.

Direct deposit is another advantage to going digital. Direct deposit has not been around forever. Employers enjoy the idea of being able to have their pay companies send their employees’ checks directly to their financial institution. Employees love the convenience of not having to pick up a paper check. It is easier for them to be able to pay their bills on time that way.

Electronic money management has also helped the environment. Most companies and banks encourage their customers to go paperless. This solves two problems. One problem is the amount of mailing that must go out each month. Going paperless allows them to save money on postage. The second thing it solves is making it possible to save trees.

In today’s busy world, it is much easier to send payment via the Internet. Customers enjoy the convenience of being able to click a few links to have their bills taken care of. It allows them to keep track of their money in real time. Online banking is also made possible due to digital banking.

Debit and Credit card companies are also benefiting from the rise of the electronic age. They are able to keep their customers’ accounts up to date much easier. They can give their clients instant information that was not available before. This has made using credit cards more efficient for everyone.

This is just some general information about how Automated Clearing Houses work. To find out what exactly is ACH Processing, it is suggested you go to your banking expert. They will be able to give you a clearer idea of how it works. It will really make you think the next time you pay that bill online.

Electronic Funds Transfer

Electronic funds transfer (EFT) is the modern alternative to the old check-clearing process when sending and receiving funds between a payer and a payee. An EFT is done through the system of automatic clearing house (ACH). In the U.S., the Federal Reserve and the private Electronic Payments Network (EPN) are the two ACH operators, with each handling 60% and 40% of the total transactions respectively. The two terms, EFT and ACH are sometimes interchangeable both referring to the process in which funds are electronically moved via the automatic clearing house system.

Parties Involved in EFT Processing

A payer, a payee, the payer’s financial institution, the payee’s financial institution, and the ACH operator are the parties involved in order to initiate and complete an electronic funds transfer. Funds can be sent by the payer instructing his or her financial institution, or alternatively requested by the payee instructing his or her financial institution. The depository financial institution initiating a transaction instruction on behalf of a customer either to send funds or request funds (receiving funds), is called originating depository financial institution (ODFI) and the depository financial institution at the other end receiving instruction is called receiving depository financial institution (RDFI).

Credit Transaction and Debit Transaction

For a transaction instruction to go through, the instruction initiator, be it the payer or the payee as facilitated by the bank, must have first obtained the authorization from the instruction receiver, the corresponding payee or payer, to be allowed the access to the receiver’s account. Having been given the account number and the bank routing number for the receiving end, the transaction initiator sending or requesting funds can then effectively deposit funds into or take funds out of the transaction-instruction receiver’s account.

Therefore, depending on the direction of the instruction flow, when the instruction is to send funds to the instruction receiver by the payer, it is a credit transaction with funds deposited into the instruction receiver’s account, the payee‘s; when the instruction is to request funds from the instruction receiver by the payee, it is a debit transaction with funds taken out of the instruction receiver’s account, the payer’s.

Example of Credit Clearing and Settlement

Setting up a bill pay with your bank. Step1, obtain account information from your payee: a lender, the cable company, the utilities, or etc. Step 2, make and confirm a bill payment on your bank’s website. Step 3, your bank as the ODFI sends your payment instruction to the ACH operator. Step 4, the ACH operator routes the transaction to the payee’s financial institution, the RDFI. Step 5, the payee’s bank makes funds available to the payee by crediting his or her account. Step 6, the ACH operator settles the transaction between the participating financial institutions.

Example of Debit Clearing and Settlement

Making an online credit card payment on your credit card company’s website. Step 1, submit your account information to your payee. Step 2, your credit card company requests your payment through their bank. Step 3, the credit card company’s bank verifies the payment request and as the ODFI, sends the instruction to the ACH operator. Step 4, the ACH operator routes the transaction to the payer’s financial institution (your bank), the RDFI. Step 5, your bank takes funds out of your account per request. Step 6, the ACH operator settles the transaction between the participating financial institutions.

If you have a business, you will be needing a credit card processing solution. Not only will you be needing a credit card processing solution that is reliable but also you will need a credit card processing solution that fits the needs of your particular business.

Another thing that you will need is to have very secure processing that will work with banking processes in the United States and internationally as well. The credit card processing solution that you ultimately get must enable you to have the capacity to process any major credit card that consumers might offer to pay for the product that your company is selling.

Also, you need a credit card processing company that will give you a reasonable price. For example, you should not have to pay an excessive amount per transaction. You need a relatively affordable credit card processing solution that will have functional utility for your company both now and in the future.

Furthermore, you should be able to accept consumer payments in various ways. For example you should be able to accept consumer payments on the internet, over the telephone or even through the mail. Whether you have just started your business or have been in business for many years, you need flexibility in terms of the ways you can accept credit cards and you need to be able to process credit cards rapidly and safely.

The card processing solution that you get should also include real time reports and features that enable you to keep track of the sales that you are making. It would also be helpful if the solution included fraud protection measures so that your business would be protected from fraud. In addition, outstanding customer service would be a true benefit for your business in the sense that there should be sufficient help available in the event that there are problems occurring with the credit card processing.

Indeed, having a quality credit card processing solution is an integral part of any business because, after all, there has to be a means of quickly and safely accepting and processing payments from customers. Thus, it is important for you to choose a company that has an excellent reputation and which has experience in providing quality credit card processing services. Keep that in mind as you go about the task of finding the right credit card processing company for your business needs.

Electronic Funds Transfer or EFT is the process by which money is transferred from one location to another electronically. It is faster than traditional methods of banking, which required an individual to go to the banking facility and deposit cash or paper checks. There are many ways that funds are transferred electronically every day. Checks from employers, the government, or other organizations that are deposited directly into a consumers account is done so electronically. This helps get the money where it needs to go within minutes of the initial transaction, anywhere in the world. Whenever goods and services are paid for with a debit card, funds are electronically transferred from one account to another.

EFT has simplified the procedure for transferring money. Instead of waiting days, it takes place in seconds. In some cases a bank may slow down the process to verify funds before the transfer is completed. For individuals that telecommute as opposed to traveling to an office, their paycheck is deposited directly into their personal accounts. It removes the risk of having paychecks sent through the postal service, making payment safe and efficient. Safety precautions such as encryption, verification and password protection are necessary for this type of transfer to occur.  If money is being sent from one country to another, currency and exchange rates are automatically calculated.

For businesses, EFT provides significant savings in consumables and personnel. Invoices do not need to be printed, stuffed into stamped envelopes and sent. Payments can be collected faster and more reliably. Many ACH processors offer software and services that allow you to process checks and debit card payments online. This software can integrate with products you already have. It often has features that allow recurring transactions as well as help reduce frauds and charge backs. For consumers using debit cards at an ATM, communication is required between several transaction participants for authorizations to be sent, recognized and received.

After being routed to an acquirer, the transaction is sent through several networks to the cardholder’s account and the merchant may require additional authentication. This may include a signature or entry of a PIN number. In the last few years, the advent of EFT has transformed banking methods from slow, unwieldy processes filled with error and potential risk to a streamlined process the moves money quickly and securely from one account to another. Payroll checks, government payments and monthly recurring bills can be paid easily. Money can be transferred anywhere in the world in just a few seconds.

An Electronic Fund Transfer is a paperless monetary transaction occurring between two banks.  In the case of online sales, the customer’s checking account information is input onto a webpage.  The customer’s bank then routes and deposits the funds into your account.  There are, of course, many more intermediary steps that occur.  However, most of these steps happen in a matter of seconds and do not require any action on your part.

There are many benefits to both the customer and business owner when using an electronic fund transfer, or EFT.  One of the main reasons to use an EFT is time savings, which are two-fold.  The first being that the funds are deducted much more quickly than when using a traditional check as they do not need to go through the mail.  This means that money is deposited into your bank account that much faster.  The second way that an EFT saves time is by cutting down on the amount of time spent on bookkeeping and keeping up on past-due invoices.

The time and energy savings associated with an electronic fund transfer are also passed onto the customer as they have a decreased lag time between writing their check and the withdrawal being deducted from their account.  This keeps their checking accounts up to date and organized.  It is also much simpler for a customer to click a button or two online rather than getting out the checkbook, finding an envelope and stamp, and heading out to the post office.  Cutting down on the customer’s effort even more, automatic reminder e-mails and payments can be set-up.  This makes customers more likely to pay on time, allowing the payment to get to you faster and reducing the amount of time you spend chasing down past-due checks.

EFTs can streamline payment by enabling automatic payments which can be applied to either fixed or variable amounts.  By setting up an automatic payment, a client is no longer required to remember when they have to pay a bill and risk it being late.  Funds set up to be deducted from the customer’s account on a specified date gets payment to you quickly, eliminates virtually any chance for delayed payment.  You then no longer have to waste your time with past-due invoices and phone calls and your clients do not have to worry about incurring any late-charges.  By having the ability to offer your clients the option of an electronic fund transfer, you are simplifying the lives of both you and your customer and getting paid in the process.

EFT is one of the things that you will encounter when you are looking for electronic financial transactions. In simple terms, EFT or electronic fund transfer refers to the transfer of money from one account to another with the use of secured codes and electrical signals. Since the world is interconnected on the Internet, it would be easier for someone in North Carolina to transfer money to the account of a company in New York. Aside from using this system in paying your purchases in an online store, it is also useful in sending money to the account of your children, paying taxes, and making personal financial transactions on the Web. By the way, EFT also includes money transfers among the different banks and financial institutions all across the globe.

Since EFT is fast and easy, it can be used by unscrupulous individuals and fraudulent groups to launder money. In order to protect the integrity and security of this new payment method, the Federal Reserve supervises the transfer of funds among banks and financial institutions in the United States. Money that is wired to and from other countries must abide by the rules of the Federal Reserve. It is worth noting that there are guidelines and maximum amounts that are allowed to be transferred for a particular period of time. Again, such safety measures are in place to protect your security as well as to ensure that illegal elements will not use banks and financial organizations in the United States.

You should realize that EFT is not only beneficial to businesses. Individuals can also enjoy a lot of benefits using this payment system. Not only will you be able to save time in paying your bills and even your taxes with the help of EFT, but you can also use it to pay recurring bills. By the way, this is also more cost-effective than paying with paper checks. Remember that check books are not free. You have to pay by the booklet. If you use up your paper checks for your bills each month, you will end up spending a lot of money just buying check booklets.

It is worth stressing that EFT development and trends are governed by the law on Electronic Fund Transfer System. This provides a series of guidelines and clauses that have to do with all electronic transactions and clearances. To ensure that you get the best EFT systems, use only companies that offer tried and tested programs. In the end, having this payment system can greatly boost your business.