EFT is the usual acronym for Electronic Funds Transfer. This program refers to the all-electronic money transfer processed out of one bank account and into another. This could be done within a single bank or over a number of different and often intermediary financial institutions. Computer systems handle these transactions entirely unaided by the intervention of human bank personnel. There are actually many different names for EFTs. Within the United States, they are often called e-checks or even electronic checks.
The phrase relates to a wide range of varying payment systems. Some of these are bank debit card or other credit card payments which a cardholding customer initiates voluntarily at a store or merchant, direct debit payments in which the firm directly debits the bank account of the consuming customers in payment for their services or goods, and payer initiated direct deposit. Other examples of this EFTs include wire transfers done utilizing the SWIFT banking international network, private currency transactions that deal with electronic money storage, and online banking electronic bill pay services that are often delivered via Electronic Funds Transfer or alternatively by using paper based checks.
Government agencies within the United States have also taken to utilizing Electronic Funds Transfers in recent years. The federal government touts them as an efficient and often practical means of collecting money and similarly paying it out electronically without having to engage in the time consuming and wasteful process of resorting to relying on paper based checks, purchasing and obtaining stamps, and generally considerable processing and mailing time lags. They encourage government agencies to adopt this payment technology if they have not already.
As the Federal Government has recently noted, EFT payments are secure, safe, and efficient. They are also less costly to utilize than any form of paper check collection or payment process. As a clear and concrete example, it helps to consider a real world case. The federal government calculates that it requires a full $1.03 in order to make a payment via a check. This represents over a dollar for a single payment transaction. Naturally this cost adds up considerably when agencies are engaging in millions of individual payments per month. Compare these costs with the government expenses for running payments via electronic formats. Every time the government enters and initiates an electronic funds transfer, it only pays the equivalent of .105 dollars (or slightly more than a single dime) per individual transaction.
In order to participate in either the government’s version of EFT or any bank’s version of electronic funds transfer, individuals must first sign up for the payment platform. Nowadays, all federal benefits have been switched over to and must be paid out electronically, which makes this more critical and timely to do now than ever before. For any person who receives any kind of these benefits, including SSI Supplemental Security Income, Social Security payments, civil service retirement payments, Veteran’s benefits, railroad retirement payments, or military federal retirement, all benefits must be received by electronic funds transfer in order to be processed and paid out each month.
There are still other benefits which both the federal government and other private parties pay utilizing Electronic Funds Transfers. The Federal government calls its various benefit payment programs either Direct Express or Go Direct. Private parties and banks utilize a range of different labels and names for these various privately run programs.