Traditional checks probably won’t disappear anytime soon, but processing checks electronically is sure to continue! Have you ever been asked to fill out your account and routing number when paying for something online or over phone – or have you provided a paper check to pay for something and it is given back to you after it is run through a machine? Did you scratch your head like I did first time that happened?
Here is how electronic check conversion works. Instead of writing out a check old-fashioned way, new way of using checks use digital signatures for signing and endorsing and have digital certificates to authenticate bank account. These e-checks are sent either by direct transmission using telephone lines or by public networks such as Internet. The “endorsed” e-check with an electronic signature is then sent over internet to payee’s bank for deposit.
Why are companies using electronic checks, you ask? Well, more stores are using e-checks because they work in same way as traditional checks, and require very little “public” education on process. Secondly, they are more cost effective, especially for corporate markets. And finally, they can be cleared easier than traditional checks.
What Does it Mean to Me that Companies are Switching Over to E-Checks?
A downside is that there is little or no “float” on your check. Basically, if you were to write a check today, you need funds in your account at time you write your check to cover payment. If funds are not available, check may bounce and a fee may be assessed by business.
It has been easy to get into habit of writing out a check right before pay day, knowing that check would not clear immediately. With emergence of electronic check conversion, that reasoning no longer is true and it can easily mean trouble.
Who Uses Electronic Checks and How do I Know?
Everyone from gas stations to restaurants and internet websites may use electronic checks, and to know for sure, you must look for a notice. By law, you must receive notice that your check has been processed electronically. Notice can be given in following ways: