EFT, an abbreviation for Electronic Funds Transfer, is a type of online exchange of money that is transferred from one bank account to another. This safe and secure method of transferring funds electronically enables individuals and companies to reduce the use of paper cheques and increase efficiency.
Features of an Electronic Funds Transfer
Electronic Funds Transfer enables individuals and companies to transfer money through an electronic means from one bank account to another without having to present a written document such as a paper cheque. One of the most popular types of EFT systems is called Direct Deposit, which is a medium for employers paying their employees’ salaries into their personal bank accounts.
EFT encompasses a wide range of other funds transfers, including credit card, ATM and Point-of-Sale (POS) transactions. Many individuals seek to set up direct debit, for bill or mortgage payment, which is a popular and widely recognized usage of EFT.
In order to protect and maintain the rights and liabilities of individuals using EFT, the US passed the Electronic Fund Transfer Act (1978), with this act being levied under the Federal Reserve Board Regulation E. The act was imposed in order to reduce errors through an EFT, however it does not enable individuals or companies to stop payment, such as direct deposit. Under this act, consumers are given the right to choose whatever banking institution they wish to conduct their personal banking with. This is an advantage in contrast to written documents such as cheques which are usually only cashed at their issuing bank.
In order to set up an EFT, individuals are required to submit certain bank account details, including account number, sort code and banking institution name. This information allows the transfer of funds to be conducted smoothly and without any errors or delays.