E-Check Processing FAQ
1 Can I accept checks over the Internet?
2 How can I accept a check over the Internet?
3 What is ACH?
4 How exactly is the money being moved?
5 What if the check is returned?
6 Will the money be taken back out of
my account if the check is returned?
7 How long does it take for an electronic
check to clear?
8 Will the funds be immediately debited
from my account?
9 What will my bank statement look like?
10 Is this process safe for the consumer?
11 What if my customer advises their
bank that the item was not authorized?
12 Is this process regulated by any government
13 What is check verification?
14 What is electronic check conversion?
15 What is check collection or check
16 What is a check image?
17 What is check re-presentment?
18 Is it better to accept credit cards
or checks online?
19 Why should I accept checks? Aren’t
credit cards and cash enough?
20 What happens if the check processor
is unable to convert my check information to an electronic ACH item?
Can I accept checks over the Internet?
Yes, most merchant accounts have the ability to accept checks over
the Internet. Your customers enter their check account information
into one of the payment forms used by our merchants and the check
is then processed through the Automated Clearing House (ACH).
How can I accept a check over the Internet?
By simply capturing all of the information on your customers check
and sending it to an Internet Check Processor, you can get paid
electronically for the sale without having to ask for a credit card
from your customer. Checking accounts already have electronic items
submitted to them, such as insurance payments and other recurring
billing payments. New rules on the use of the banking systems ACH
Network allow a paper check to be converted into an electronic item
and processed in the same way as other electronic items.
What is ACH?
The ACH Network is a financial settlement intermediary network used
by banks to transfer funds to and from each other. The ACH Network
has been used by banks for over 25 years and is a safe and secure
payment system, processing billions of commercial transactions each
year. Recently the ACH Network has introduced new rules that provide
for more types of electronic uses of traditional checking accounts
How exactly is the money being moved?
When the ACH/Check Processor submits your customer's check electronically
for clearing, they also submit a Credit transactions assigned to
your own bank account to pay you for the sale. Both of these transfers
are accomplished over the ACH Network.
What if the check is returned?
Most ACH/Check Processors will automatically re-present the returned
electronic check if the return is due to insufficient or uncollected
funds. The more sophisticated services will also time the re-presentment
to hit the checkwriter's account on the day after payday. Depending
on the size of the item, some services will also call to verify
the availability of funds prior to resubmission.
Will the money be taken back out of my account
if the check is returned?
Depending on the service provider, the money may be taken back out
of your account immediately, or you may be allowed to borrow, or
float, the funds while the processor tries to resubmit the item
to collect the funds. Other processors will not pay you until after
the initial item has cleared.
How long does it take for an electronic
check to clear?
Just as some banks will put a 5 day hold on deposits you make, it
may take 5 business days to receive a returned item. There is no
official notification that an item has cleared with the ACH System;
rather, the lack of a return within the 5 business days can be construed
to mean that the check has cleared.
Will the funds be immediately debited from
No, check writers will continue to benefit from some of the float
of a paper check, since the electronic check is processed through
the banking cycle in approximately the same amount of time as traditional
paper checks. Typically electronically checks are presented to the
ACH system a day or more sooner than paper items, so that the consumer
may see the item hit a day sooner than with a paper item.
What will my bank statement look like?
A complete description of the transaction is included in the check
writer’s bank statement for reconciliation purposes, including
check number, merchant name, nature of the payment, settlement date
and amount. It will appear with other electronic payments, such
as direct payroll deposits or ATM transactions.
Is this process safe for the consumer?
Companies that process payments electronically (checks, credit cards,
ATMs) must follow government guidelines. In case of an error or
dispute, consumers have 60 days from the posting date to notify
the bank, the same time frame they have today with paper checks.
Check writers retain the same rights they currently enjoy in disputing
fraudulent items posted to their account.
What if my customer advises their bank that
the item was not authorized?
Consumers that claim that an item was not authorized must file an
affidavit with their bank stating this explicitly. Once this has
occurred, and the item is returned to the check processor, the merchant
will be debited the amount of the item. No further ACH submission
of this item is allowed. Any claims by the merchant must be pursued
in court or by other means.
Is this process regulated by any government
The electronic check conversion process is governed under Regulation
E and UCC 4, which govern all electronic processing and check transactions.
What is check verification?
Check verification is a low-cost service that verificies checks
you might accept from a customer. Checks are verified against a
database, and with ECHO's XpressVerification service, you benefit
from our proprietary database, National Check Network(R) (NCN).
NCN contains 17 million negative records and 70 million positive
records against which your check will be confirmed. If the account
number corresponds to a problem account (an account where checks
have bounced and not been repaid) you are notified through the system
response. Read about XpressVerification on our Web site, or visit
our NCN site for information on NCN and its application for collection
agencies and major accounts.
What is electronic check conversion?
Electronic Check Conversion, or "ECC" greatly reduces
the cost, time, and risks associated with check acceptance at the
point-of-sale (POS). It converts paper checks into electronic items,
so you don’t have to deposit checks at your bank. This means
that you get your money faster and you can detect problems with
specific accounts sooner.
What is check collection or check recovery?
Check collection (sometimes called recovery) is a service that uses
traditional means to collect on checks that have been returned unpaid.
When your merchant accountreceives the returned check, some merchant
account roviders will make telephone calls and/or send letters to
collect from the consumer.
What is a check image?
During the electronic check conversion process a digital image that
is available on-line at a secure Web site. While the transaction
data is processed through the Automated Clearing House for fast
and secure processing, a parallel process at the point of sale captures
an image of the check and stores it in the MICR reader/check imager.
The check images are then transmitted to the on-line image repository
where merchants can retrieve them by logging in with a PIN number
and User ID. Merchants generally use the images for two purposes:
1) collection of bounced checks; 2) copying the customers name and
address information from the check for use in a mailing list or
other marketing purposes.
What is check re-presentment?
Check re-presentment is an automated, consumer friendly, electronic
process to collect returned checks. For the merchant, the check
acceptance process at the point of sale is virtually the same. You’re
not bothered with collection issues, instead, your bank mails us
all your returned checks. We re-present them up to two times electronically
through the Automated Clearing House (ACH). The second re-presentment
is on the 1st or 16th of the month to increase success rates.
You are paid 100% of the face amount of the check upon collection.
Funds are electronically credited to your account twice a month.
Is it better to accept credit cards or checks
Accepting credit cards and checks on-line both have advantages.
Credit cards are generally the most widely used payment choice for
on-line transactions. Therefore, accepting them means you open up
your business to the widest possible market of buyers. Consumers
like credit cards because they are secure, offering an easy means
of protecting themselves from unscrupulous merchants. Plus, they
have the obvious advantages of allowing merchants to put a purchase
on credit while lending increased credibility to your business.
On the other hand, checks continue to be the most popular form
of payment in the off-line world, and are increasingly popular on
the Internet. In 2001, $11.5 billion was processed from Web sites
through the Automated Clearing House, 54 million items, and the
number is growing fast. Millions of U.S. households do not have
credit card accounts, so selling to this group means providing checks
as an alternative.
Why should I accept checks? Aren’t
credit cards and cash enough?
Since the 1970’s, pundits have talked about a “checkless
society” where payments are all made electronically. Nevertheless,
this is far from true even today. The Federal Reserve Bank reported
that more than 50 billion checks are written per year. Another study
showed that 71% of consumers plan to write more checks or about
the same number this year as they did last year.
Obviously, people want to continue using checks for various reasons,
including the cash management discipline they provide, avoiding
the debt-increasing factor of using credit cards, and, if nothing
else, habit. As a merchant, you want to accommodate your customers’
choice of payments, so clearly accepting checks is important for
What happens if the check processor is unable
to convert my check information to an electronic ACH item?
This may occur in a very small percentage of cases and for various
reasons. In those cases your merchant account provider will usually
print a paper check draft with your account information and deposit
it just like a regular check. You will be paid electronically once
the paper item has cleared.