What Is an eCheck?

Elizabeth Amaya, Senior Preferred Banker Associate, First Republic Bank

January 14, 2022

An eCheck is a payment method that enables bank account holders to pay for recurring and one-time expenses directly from their checking account.
eChecks are encrypted transactions, which means they can be safer than paper checks and other types of electronic payment options.
eChecks are one of several types of electronic funds transfers (EFTs) available through online banking, but each digital payment option differs somewhat.

The internet has made online payment processing convenient, safe and secure for personal account holders and business owners. This is particularly the case with eChecks, also known as electronic checks. If you're looking for a secure payment method, eChecks can be a strong option among the digital payment options available.

eCheck definition

An eCheck is an online version of a paper check that lets banks or financial institutions process payments digitally. Similar to paper checks, eChecks require a bank account number and routing number. Account holders validate eChecks by accepting the terms and conditions of the website handling the transaction.

How does an eCheck work?

eChecks are processed through the automated clearing house (ACH) network, which also handles other digital payments (debits and credits), such as direct deposit and payroll. Individuals and businesses can get eChecks from their bank or financial institution; this functionality is often built into an account holder’s digital banking tools. eChecks can be issued or received by the bank account holder and can go between individuals or businesses.

eChecks can go through four to six steps to get from the payer to the payee. First, the payer authorizes the payment information and the amount of money being transferred. Next, funds are withdrawn from the payer’s bank account. Funds are then transferred through the ACH network, then finally deposited into the payee’s account.

There are several different ways in which you can use an eCheck, both for recurring and one-off payments.

Example Uses of an eCheck

Mortgage payments
Monthly rent payments
Car loan repayments
Legal retainer fees
Membership fees
Tax payments
Credit card payments
Utility payments

Because you can use an eCheck for a variety of payments, you may be concerned about the security of eChecks if they are used instead of paper checks. However, there are many safety upsides to using an eCheck as your payment method.

Are eChecks safe?

Actually, eCheck payments are generally safer than paper checks. Because the check is processed electronically, it’s an encrypted transaction. Encryption protects sensitive data by scrambling text, so the transaction information is unreadable to anyone without a decryption key, even if it’s accessed by someone else. This means the electronic transfer is highly secure.

Additionally, because you aren’t using a physical check, fewer individuals handle your information. This limits how many people and systems are viewing your personal and financial details.

Benefits and drawbacks of an eCheck

There are several benefits and potential drawbacks that come with using an eCheck.

Benefits	Potential Drawbacks
Safer and more secure than a paper check Encrypted transaction provides a high level of security Can be used for a variety of transactions, including both one-off and recurring payments, such as credit card bills Available as an online payment option through most digital banking services Can be issued quickly through online banking portals Can be sent internationally some of the time	Some institutions may not accept eChecks or may prefer paper checks Cannot be physically mailed or delivered if required May be subject to some fees, depending on the financial institution Some accounts may limit the number of daily or monthly transactions Can only be used for international payments some of the time

An eCheck is an excellent, secure form of payment, but it’s only one of many electronic money transfer options.

eCheck vs. other electronic fund transfers

An eCheck is a type of electronic funds transfer (EFT), which flows between bank accounts (often originating from a checking account). They are completed via computer, which means the staff of the financial institutions involved don't handle money or a paper check.

While there are some similarities, each type of EFT has its own uses and considerations.

EFT Option	Uses and Considerations
eChecks	One-time and recurring payments, such as credit card payments or rent, used in place of a paper check payment Generally processed 3 to 5 business days after issue
ACH Payments	Direct bank-account-to-bank-account payment, generally from one checking account to another, which flows through the Automatic Clearing House network Generally processed within 2 business days, but often can be expedited in a single day
Debit Cards	One-time payment charged against a checking account, instantly authorized by merchant or recipient for goods or services Generally processed within a day
Wire Transfers	One-time direct transfer between bank accounts; may be less secure because the transfer is non-reversible once initiated Generally processed in 1 to 5 business days
Peer-to-Peer Payments	One-time payment between two individuals, generally through a mobile app, such as Zelle or Venmo Processed instantly, but sometimes balance can be held in the app and the user must initiate transfer to a linked bank account

Final thoughts

eChecks are an excellent choice to transfer funds for many individuals and businesses. They can be used for a variety of payments, both big and small, and are safe due to their encryption. Many merchants and proprietors accept eChecks and some even prefer them over paper checks.

Importantly, many financial institutions offer eCheck functionality with their online checking account options, making it easy to send eChecks for both one-time and recurring payments from your bank account.

To figure out the best type of electronic payment option for your situation, it’s helpful to compare eChecks with other EFT options to find the best fit.

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