The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.
An eCheck, or electronic check, is a digital version of a paper check that transfers funds electronically between bank accounts through the Automated Clearing House (ACH) network. Instead of writing and mailing a physical check, the payer submits their bank account information online, and the payment is processed digitally.
eChecks are generally considered to be a safe, fast, and cost-effective payment option. They help businesses receive direct deposits from customers or clients, facilitate recurring payments, and expand their payment options without the overhead of card processing fees.
Key takeaways:
Electronic checks, also known as eChecks, online checks, direct debits, or internet checks, work similarly to paper checks. Instead of writing a check by hand and mailing it, an individual fills out their information online and sends the check electronically.
The Automated Clearing House (ACH) network then connects the banks and facilitates the transfer of funds between accounts.
Here's a closer look at how eCheck payment processing works:
To accept payments via eCheck, businesses need to work with a payment processor that will help facilitate the eCheck payment and transaction.
They can also help set up a payment gateway to safely and smoothly accept eChecks at different points of sale, such as in-store or through an e-commerce website.
Learn more about how to accept checks online and the options available through PayPal.
eChecks are typically a secure form of payment and can be preferred over payment methods like paper checks.
eChecks typically come with certain protections that can help businesses manage risk. Most notably, they're verified by the ACH network, which authenticates customer information and encrypts data for enhanced eCheck security. eChecks also require timestamped digital signatures to help prevent fraud.
For more on how payment security works, see our guide to payment fraud detection and network tokenization.
An electronic funds transfer (EFT) refers to any digital transfer of funds between accounts. ACH payments and eChecks are both types of EFTs, for example. Other types of EFTs include wire transfers, direct deposits, and digital wallet payments.
An ACH payment is any payment that's made from one bank account to another and facilitated by the ACH network. eChecks are a form of ACH payment, but not all ACH payments are eChecks.
A wire transfer is a specific method of moving money electronically from one bank to another. The big difference is that wire transfers directly transfer money between two banks. That means they can move funds in minutes, but they can also be more costly and less secure.
eChecks, on the other hand, are processed and verified by an ACH network first, so they can take a bit longer to clear.
To explore faster alternatives, see our guide to real-time payments.
It typically takes 3–5 business days to process an eCheck and deposit the money into the account. That's because the ACH network processes payments in batches, not one by one. Once processing begins, the network has to verify the customer's bank information and perform security checks; all of which takes time.
eChecks are not processed on weekends or holidays. So if a customer sends an eCheck on Friday, the payee may not receive the funds until the middle or end of the following week. Factor this into your cash flow planning if you rely on eCheck payments.
For businesses that accept recurring eCheck payments, setting up auto transfers can help manage timing and cash flow more predictably.
eChecks are known to be a safe, fast, and more reliable alternative to traditional checks. eChecks are also a good solution for setting up recurring payments.
Customers can simply authorize recurring payments when submitting their eCheck information, and the ACH will automatically pull the funds from their account each month.
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eChecks work especially well in situations where lower fees and reliability matter more than speed. Common scenarios include:
See our freelancer invoice template guide for more on streamlining payments with contractors.
eCheck scams are possible. E-commerce scammers may use fake or stolen bank account information to initiate eCheck transactions, leading to unauthorized withdrawals from victims' accounts.
Here's how to protect your business:
Learn more about how PayPal approaches payment fraud detection.
When customers are ready to pay, businesses should be ready with their preferred payment methods. Even with credit card, debit card, and digital wallet acceptance, eChecks can help expand payment options and drive revenue.
As a payment processor, PayPal provides the tools to get paid online and in person. Organizations can use a PayPal Business account to start accepting eChecks from customers. Our eCheck fees are set according to current commercial transaction rates.
Our payments infrastructure uses encryption and automated fraud detection to help protect your transactions and reduce the risk of unauthorized activity.
Review PayPal's merchant fees to understand what to expect.
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