About E-checks

By Jack Gerard

Checks and checking accounts have always played a large part in commerce, but with the advent of online shopping they have become more difficult to use. While paper checks can be mailed to online retailers, the purchased items generally will not be shipped until the check has been received and the check has cleared deposit. Instead of making checking customers wait up to two weeks or more for their checks to clear, many online retailers have begun offering e-checks as a payment option in addition to credit cards and similar payment sources. E-checks allow online shoppers an easy method of paying for purchases directly from their checking account, without having to send in an actual paper check.

How E-checks Work

An e-check works in much the same manner as a paper check, though without the need for a check to actually be written and processed by the recipient's bank. When you authorize an e-check payment it is processed as a debit transaction using the routing and account number of your checking account. The amount that is debited by this transaction is then transferred to the merchant's account in much the same manner as if you had written a paper check.

Significance

E-checks not only allow for a greater amount of convenience when shopping online but also offer a way to make online purchases without a credit card. Since the amount of the e-check is taken directly out of your checking account, there isn't the same risk of increasing debt as you might encounter with using a credit card for online purchases. E-checks also allow online shoppers the chance to track most, if not all, of their spending through the same checking account that they use for purchases at local retailers.

Processing Considerations

Many online retailers do not accept paper checks for purchases because of the extended timeframes involved in having to wait for customers to send in a payment and then waiting for that payment to clear before the order can be fully processed. E-checks eliminate this waiting game, allowing the payment to be processed almost instantaneously in many cases. Even when there is time between the moment when the e-check was issued and when the payment clears, the timeframe is generally a matter of 3 to 5 days. It would normally take 10 to 14 days for paper checks to clear.

Acceptance

Not all retailers accept e-checks, though they are commonly accepted by a significant number of online retailers. Some third-party payment options such as PayPal will allow you to submit e-check payments to most retailers that accept their payment methods, giving you the e-check option when it might otherwise not seem to be available. A growing number of physical stores have begun integrating their check processing systems into an e-check payment method as well; instead of processing a paper check as normal, the account and routing numbers on the check are scanned and the payment is processed electronically instead.

Checking Account Management

The same care must be taken when using e-checks as you would apply to your checking account if you were only using paper checks. Make sure that you record all e-check transactions when they are made and that you update your account balance regularly in order to avoid overdraft charges and bounced checks. Consult account statements each month to make sure that all of your e-check purchases are included when you balance your checkbook.