What are the Benefits of Electronic Fund Transfers?

The electronic fund transfer is one of the best management tools for handling cash, especially when it comes to businesses. In fact, most businesses these days are now using various EFT systems because it is more convenient that way. As the name literally implies, it is a method wherein clients exchange money electronically instead of doing wire transfers or writing checks.


Sometimes electronic fund transfers are often known as ACH transactions. ACH means Automated Clearing House, this is a national body that governs the electronic payment network. It allows the clearing of the payments done electronically and also with information related to the payment in between two or within the financial institution. The payment-related information is oftentimes sent together with the ACH transactions, which is a process named as EDI or electronic data interchange.


While most people may have never heard of the ACH term, some aspects of this system may be familiar, especially with the usual financial transactions such as making a deposit, withdrawing from their account, transferring of funds and so on. Others include the following:


  • Direct credit and debt – these are the kind of electronic fund transfers wherein it can be made between business to consumer and business to business. Consumers pay up a lot of recurring bills, like utilities, mortgages, health memberships, insurance through the ACH. Many businesses also pay up their suppliers and vendors through the ACH credits rather than use paper checks.
  • Direct deposit – this is the most common ACH payment type. Many companies these days pay their employees using direct deposit rather than the paper check. Direct deposit is also utilized by various government entities in order to make Social Security and many other beneficiary payments to issue the refunds onto taxpayers.
  • Local and state taxes – depending on where you live, most of the taxes are transferred using the electronic fund transfers system. ACH has been the common transfer method for payment on various forms of taxes at all government levels.


The main benefits of using the electronic fund transfers system are convenience and savings on costs. The alternative to this, which is moving the funds through wire transfer can be quite expensive. One transaction could cost up to $20 or even more depend on the distance and the amount you wish to send. If you have already planned your wire transfer ahead of time, such as a 2 or 3 days prior, the money can be sent through the ACH credit or debit system and you only get to pay below $1 each transaction.


Most employees are also getting used to the convenience of getting their salary through direct deposit. Employers also get to save money as well, since the payroll is done through direct deposit, not to mention the method can be very affordable since there is no need to issue paper paychecks at all.


There are also cash flow advantages that other entities get to enjoy with this kind of system. The reason is because they are assured that the payments get paid automatically on the date until they are due.