Most people and company owners are familiar with the terms electronic fund transfer and automated clearing house but what is the difference between the two. With the advancement of information and communication technology and the fast-paced world we live in, banks embracing an e-banking culture that enables terms to offer their consumer better and more flexible products and services. Terms like ACH and EFT are frequently used in this situation. You have engaged in an EFT or transaction if you receive your paycheck via direct deposit or your gym membership is automatically taken from your bank account. There are many similarities and Differences between EFT and ACH payments.
EFT and ACH are fundamentally different from one another since EFT is an electronic fund transfer that takes place between two financial institutions. Whereas an ACH is an electronic clearinghouse that handles electronic payment. But first, what exactly do EFT and ACH do? In this article, we'll compare and discuss the key differences between the two payment methods EFT Vs ACH.
What is EFT?
EFT stands for electronic fund transfer. It is refer to the entire spectrum of electronic payments. For a cashless transaction, this transfer mechanism involves the transmission of money over a computer network. Everything from direct deposit and ATM withdrawals to online bill payments is considered an EFT transfer. It is a catchphrase that covers ACH payments among other things. EFT payments are authorized by pin numbers, cards, or protected passwords rather than manually by rank employees.
Types of EFT payment:
- Credit card and debit card transactions
- Virtuals wallets
- Wire transfer
- Over-the-phone transaction
- Peer-to-peer payments
What is ACH?
ACH stands for Automated Clearing House. EFT is a general phrase, whereas ACH is more precise. Any bank-to-bank transfers using the automated clearing house network of financial institutions are referred to by this system. It handles all clearing and settlement concerns, allowing electronic transactions within banks and credit unions with US locations. Payroll direct deposit, auto bill pay, and social security benefits are a few examples of ACH transactions. The fact that money is moved in large batches or groups helps to reduce transfer fees to a minimum. A quick way to transfer money between bank accounts is through ACH transfers.
ACH Transfer method:
- When sending money or paying bills online, automated clearing houses offer convenience.
- ACH paycheck direct deposit
- Person-to-person payment
- Internation payments
- Healthcare claim payments
- Business-to-business payment
- Direct deposit of government benefits or tax refunds
EFT Vs ACH | Difference between EFT and ACH:
- EFT stands for electronic fund transfer, While ACH stands for Automated Clearing House.
- EFT as the name suggests is the one type of digital transfer of money between two bank accounts of the same or different bank. ACH is the system of clearing settlement that assist in the processing of electronic transaction between two depository institutions.
- The secure, convenient, and safe transfer of money between two bank accounts is the focus of EFT. ACH links nationwide banks and financial institutions to facilitate monetary transactions.
- Money transfers made using EFT require less time than those made by ACH since the former settles transactions in real-time or very close to real-time, whereas the latter does so in batches that take some time.