Electronic Fund Transfers

Electronic Fund Transfers (EFT)

By now, most depositors have some familiarity with the machines in bank lobbies that enable customers to make withdrawals from, or deposits to, savings and checking accounts without the aid of a human teller. But such machines are only one aspect of electronic fund transfers. An increasing number of other transactions are also being handled by computers. Here are descriptions of a few of the electronic services available in a number of banks.

Preauthorized Payments

One of the relatively new forms of electronic banking is the preauthorized payment, in which money is automatically deposited or withdrawn from an individual’s savings or checking account. For example, an employer who is authorized by an employee to do so, may place the employee’s paycheck in his or her account through an electronic fund transfer. Some major companies deposit a single payroll check (actually a computer tape authorizing payment) for all their employees who are patrons of a particular bank. The bank’s computer has already been programmed to divide the payment according to each employee’s salary. A more sophisticated method now coming into use is for the employer to route the total payroll tape to a regional automated clearinghouse, where a computer not only divides the tape into individual payment orders but dispatches these orders — again via computer — to all of the participating banks in the area in which the employees have accounts. Other regular payments, such as Social Security checks or dividend checks, can be, and often are, deposited electronically via automated clearinghouses.

Similarly, an account holder may authorize the bank to transfer money electronically from his or her checking account on a certain day each month to pay the mortgage, the telephone bill and other regular expenses.

Point of Sale Terminals (POS)

These are electronic fund transfer machines located in shopping centers and department stores. Instead of paying for a purchase with a check or cash, or charging it to a credit card, a bank depositor can activate the POS terminal and transfer funds electronically from his or her account to that of the merchant. This is one of the newest forms of electronic fund transfers, but it will probably be some years before the service is available on a nationwide basis.

See also Your Rights as an EFT Customer and EFT Errors Settlement

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