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E-Checks (Electronic Check Conversion)
The next time you write a check to
your local merchant, the cashier may hand it back to
you after it's been processed - electronically. Or maybe
you're mailing a check as payment to a company. That
payment, too, may be processed electronically. Why?
More merchants and companies are using e-checks, also
known as electronic check conversion, which converts
a paper check into an electronic payment from your bank
account. In fact, NACHA - the Electronic Payments Association
- estimates that 167 million paper checks were converted
into e-checks through in-store transactions in 2002.
How does
electronic check conversion work?
When you give your check to a store cashier, the check
is processed through an electronic system that captures
your bank account information and the amount of the
check. Once the check is processed, you're asked to
sign a receipt and you get a copy for your records.
When your check has been processed and returned to you,
it should be voided or marked by the merchant so that
it can't be used again. The merchant presents the processed
check to your bank or other financial institution electronically,
and the funds are transferred into the merchant's account.
Electronic check conversion also is
being used for checks you mail to pay for a purchase
or to pay on an account. The merchant or company sends
your check through the electronic system, and the funds
are transferred into their account.
How will
I know if companies I do business with use electronic
check conversion?
By law, you must receive notice if your check will be
processed electronically. Notice can be given in different
ways: In a store, a merchant might post a sign at the
register or give you a written notice. For a mailed
check, the company might include the notice on your
monthly statement or under its terms and conditions.
The notice also should state if the merchant or company
will electronically collect from your account a fee
- like a "bounced check" fee - if you have
insufficient funds to cover the transaction.
Will I get
my checks back?
Your financial institution may be unable to give you
a duplicate copy of your checks, so it's important to
keep your checks - and receipts - that have been processed
electronically in a store, especially if you need proof
of payment. In the case of merchants and companies that
use electronic check conversion for your mailed checks,
you won't get your check back because it was transmitted
through the process only electronically. However, if
you need a copy of the check they processed, you can
always ask the merchant or company if they'll provide
it to you.
Will the
electronic payment be shown on my monthly bank statement?
Yes. Your bank statement must show the electronic transaction.
It should include the name of the merchant or company,
the payment amount, and the date the payment was electronically
transferred from your account. This information may
be included in an area other than where your paper checks
are listed, so carefully review the entire statement.
It's important to keep your bank statements; they can
be used as proof of payment for your transactions.
What does
electronic check conversion mean to me?
There may be no float on your check. That means, if
you write a check today, you need to have funds in your
account today to cover it. If you don't, your check
may bounce and you may be charged a fee by the merchant,
your financial institution, or both. Bounced checks
can blemish your credit record. If you're concerned
about bounced check fees, you may want to consider overdraft
protection or a backup line of credit on your account.
Be aware, your financial institution may charge for
these services.
What if I
find an error on my account?
Promptly review your bank statement for errors. For
example, did two electronic payments go through instead
of one? Were you charged the wrong amount for the item
purchased? You have 60 days from the date your statement
was sent to you to notify your financial institution
of any errors. Your financial institution might take
up to 45 days from the date you notify it to investigate
the situation. In most instances, if it will take more
than 10 business days, your financial institution must
credit your account while it investigates the error.
What if I
find unauthorized electronic transactions on my account?
If you find unauthorized electronic transfers on your
account (or someone has fraudulently obtained your banking
account information), notify your financial institution
immediately. Your level of loss depends on how quickly
you report the problem.
- Under federal law, if you report the loss within
two business days of discovery, you won't be responsible
for more than $50 in unauthorized transfers.
- If you fail to report the loss within two business
days, but report it within 60 days after the statement
containing unauthorized transfers is mailed to you,
you could lose up to $500.
- If you fail to report the unauthorized transfers
within 60 days after your statement is mailed to you,
you risk losing all the money in your account and
the unused portion of your maximum line of credit
for overdrafts.
Contact your financial institution
about any additional limits on liability.
Keeping Close
Tabs on Your Account
The Federal Trade Commission suggests that you:
- Keep track of deposits. Make sure
you record all deposits to your checking account in
your checkbook immediately. When you make deposits,
save the receipts. They can help resolve mistakes.
- Remember to record all automatic or Electronic
Fund Transfer (EFT) deposits, such as your
paycheck, in your checkbook when they're credited
to your account.
- Keep track of withdrawals. Immediately
record your transactions. This includes: checks you
write; ATM withdrawals; all automatic payments, including
electronic check conversion, debit card payments at
the point of sale, and other direct payments; and
fees or service charges, including ATM fees.
- Promptly balance your account when your
statement arrives. This means reconciling
the information you have recorded in your checkbook
against the statement your financial institution sends
to you. Review your entire bank statement; checks
processed electronically may be recorded in an area
other than where your paper checks are listed, such
as under "other withdrawals."
- Review your statement to be sure checks
were only processed electronically once and for the
correct amount. If your account won't balance,
and you can't find the error, promptly call your financial
institution for help.
- Be especially careful with telephone transactions.
If a merchant or company lets you make a payment by
e-check for a phone transaction, they should notify
you that they will process your payment electronically.
They will then ask for your bank and checking account
numbers as they appear at the bottom of your check,
and for permission to charge the account for the item
you're paying for. Your transaction will then be processed
and the funds withdrawn from your account and deposited
in the merchant or company's account electronically.
- Be especially cautious about sharing your
bank and checking account numbers. Do not
give out personal information on the telephone unless
you have initiated the contact or know who you're
dealing with. Scam artists can use your personal information
to commit fraud - such as identity theft. That's where
someone uses your personal information, such as your
checking or credit card account number, Social Security
number, mother's maiden name, or birth date, without
your knowledge or permission, to commit fraud or theft.
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