In an electronic funds transfer (EFT) system funds can be transferred more quickly and more economically than by paper checks. EFT tools include electronic check conversion, debit cards, smart cards, direct deposits, and direct payments.
Electronic check conversion (ECC) converts a traditional paper check into an electronic transaction at the cash register and processes it through the Federal Reserve's Automated Clearing House.
Debit cards look like a credit card, but serve the same functions as checks, i.e., they withdraw funds from your checking account. When a customer uses a debit card, the transaction is electronically reported to the bank, transferring funds from the customer's account to the store's account automatically.
Payroll debit cards are issued to employees by employers in lieu of checks or direct deposit. These are for employees without bank accounts. They allow them to make online payments, use the card as a credit card or debit card, and access cash from an ATM.
Smart cards are a combination of credit cards, debit cards, phone cards, driver's license cards, and more. Smart cards replace the typical magnetic strip on a credit or debit card with a microprocessor. Merchants can access the card's information to check the card's authenticity and spending limits. The dollar amount of the transaction is then debited to the card. Some smart cards have embedded radio-frequency antennae that make it possible to access buildings and secure areas within buildings, as well as buy gas and fast food. Students are using smart cards to open locked doors to dorms and identify themselves to retailers near campus and on the Internet. They also serve as ATM cards.
For many, the ultimate convenience in banking involves automatic transactions such as direct deposit and direct payments. A direct deposit is a credit made directly to a checking or savings account. Many employees have their paycheck automatically deposited to their checking account.
A direct payment is a pre-authorized electronic payment. Customers sign a separate authorization form for each company they would like to pay automatically. This form authorizes the designated company to collect funds for the amount of the bill from the customer's account.