EFT vs. ACH payments

EFT vs. ACH payments: The Differences

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Electronic transfers provide a fast, secure, and convenient way for individuals and businesses to transfer funds between bank accounts. They eliminate the need for manual processes such as check printing, depositing, and processing, reducing the risk of errors and fraud. Moreover, electronic transfers can be tracked and traced, providing greater transparency and accountability in financial transactions.

EFT (Electronic Funds Transfer) and ACH (Automated Clearing House) payments are two widely used methods for transferring funds electronically between bank accounts. While both methods are efficient and secure, they differ in several ways. In this article, we will discuss the key differences between EFT and ACH payments.

EFT payments are a broad term used to describe any electronic transfer of funds between bank accounts. This includes wire transfers, credit card transactions, and ATM withdrawals. On the other hand, ACH payments are a specific type of EFT payment that uses the ACH network to transfer funds between accounts in the United States.

Speed of transfer

One of the key differences between EFT and ACH payments is the speed of transfer. EFT payments can be processed in real-time, while ACH payments can take several days to complete. This is because ACH payments are processed in batches, typically overnight, whereas EFT payments are processed as soon as they are initiated.

Price

Another difference between EFT and ACH payments is the cost. EFT payments can be more expensive than ACH payments, as they are typically used for high-value transactions such as wire transfers or credit card transactions. ACH payments, on the other hand, are designed for low-value transactions such as payroll and vendor payments and are generally less expensive than EFT payments.

Security

Security is another area where EFT and ACH payments differ. EFT payments are generally considered more secure than ACH payments, as they are often accompanied by additional security measures such as two-factor authentication and encryption. ACH payments, on the other hand, are more susceptible to fraud and errors due to their use of batch processing and lack of security measures.

Transaction limits

Another significant difference between EFT and ACH payments is the transaction limits. EFT payments typically have no transaction limit, while ACH payments have a limit of $25,000 per transaction. This makes EFT payments more suitable for high-value transactions, such as real estate transactions or business acquisitions.

Usage

In terms of usage, EFT payments are more common in international transactions, where they are used for high-value transactions that require fast processing times. ACH payments, on the other hand, are more commonly used for domestic transactions, such as payroll and vendor payments.

Process of initiating

Finally, the process of initiating EFT and ACH payments also differs. EFT payments are typically initiated by the sender, who provides the recipient’s bank account details and the amount to be transferred. The recipient’s bank then verifies the details and processes the payment. ACH payments, on the other hand, are typically initiated by the recipient, who provides their bank account details to the sender. The sender then initiates the payment through their bank, which is then processed through the ACH network.

To sum up, while both EFT and ACH payments are effective and secure methods for transferring funds electronically, they differ in several ways. EFT payments are faster, more expensive, and more secure than ACH payments, making them more suitable for high-value transactions. ACH payments, on the other hand, are slower, less expensive, and more commonly used for low-value domestic transactions such as payroll and vendor payments.

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