How Electronic Checks Work - Will Paper Checks Eventually Go Away?
Traditional checks probably won't disappear anytime soon, but processing checks electronically is sure to continue! Have you ever been asked to fill out your account and routing number when paying for something online or over the phone - or have you provided a paper check to pay for something and it is given back to you after it is run through a machine? Did you scratch your head like I did the first time that happened?
Here is how electronic check conversion works. Instead of writing out a check the old-fashioned way, the new way of using checks use digital signatures for signing and endorsing and have digital certificates to authenticate the bank account. These e-checks are sent either by direct transmission using telephone lines or by public networks such as the Internet. The "endorsed" e-check with an electronic signature is then sent over the internet to the payee's bank for deposit.
Why are companies using electronic checks, you ask? Well, more stores are using e-checks because they work in the same way as traditional checks, and require very little "public" education on the process. Secondly, they are more cost effective, especially for corporate markets. And finally, they can be cleared easier than traditional checks.
What Does it Mean to Me that Companies are Switching Over to E-Checks?
A downside is that there is little or no "float" on your check. Basically, if you were to write a check today, you need funds in your account at the time you write your check to cover the payment. If funds are not available, the check may bounce and a fee may be assessed by the business.
It has been easy to get into the habit of writing out a check right before pay day, knowing that the check would not clear immediately. With the emergence of electronic check conversion, that reasoning no longer is true and it can easily mean trouble.
Who Uses Electronic Checks and How do I Know?
Everyone from gas stations to restaurants and internet websites may use electronic checks, and to know for sure, you must look for a notice. By law, you must receive notice that your check has been processed electronically. Notice can be given in the following ways:
In a store, there might be a sign posted that says electronic checks are used.
For mailed checks, businesses might include notice on a monthly statement or under the terms and conditions section of your agreement.
In addition to the notice, information should also be provided from the company on how insufficient funds are collected and what the associated fee is for recovering those funds.
Do I Get My Check Back and Will the Payment be Shown on My Monthly Statement?
Your bank may be unable to give you a copy of your checks, so it is important to keep records of the checks written out - duplicate checks are a great solution to this dilemma. If you run into a bind and need a copy of a check written to a merchant, check with that business, they may be able to provide it to you.
You payment must be shown on your monthly bank statement. It should include the name of the business, the payment amount and the date the payment was electronically transferred from your account.
What if There is an Error on Your Account or Unauthorized Transactions?
Be in the habit of reviewing your account regularly for errors. Did two payments go through instead of one? Were you charged the wrong amount? By law, you have 60 days from the date your statement was sent to you to notify your financial institution of any errors. Your bank may take up to 45 days from when you notify them to investigate the issue. Normally, your bank will credit your account while the investigation occurs.
Robb Ksiazek is a successful author and publisher for Checks-4U.com. He has researched and written hundreds of articles and can simplify your online search by recommending merchants for the best value and selections in business or personal checks, address labels, rubber stamps and envelopes.
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