How Does Electronic Check Payment Processing Work?

When we say ‘electronic check’ (or e-check), a lot of people assume we’re referring to a soft copy check, meaning a paper check has been scanned or photographed and sent my email, text, or instant messaging. This isn’t necessarily true. An e-check actually has several differences. For one thing, a paper check is sent by the buyer. With e-checks, the buyer authorizes the check in advance, but it’s you as a business that ‘writes’ the check.

Here’s how it works. With paper checks, your customer will write or type the check, sign it, then mail it to you. Hence ‘the check is in the mail’. When you and your customer opt for the electronic method, the customer just gives you the numbers on the bottom of their check, and you are able to withdraw the check amount electronically.

Writing an e-check

The e-check itself doesn’t even need to be written at all by your customer. You can send your customer an online form to fill, where they input their checking account details, or they can just give you that information over the phone.

You can then charge the amount you are owed as an e-check, and your money will be deposited automatically, just as if you had deposited the check in person.  To fully understand the process, it may be helpful to look at two other terms: ACH and EFT.

EFT (electronic funds transfer) is a generic term for any cash that is transferred from one bank to another using electronic means. Basically it’s cash that is transported online, as opposed to physical money that moves around with guards in an armored truck. When you’re using electronic methods to push move money, the ‘truck’ is called ACH (Automated Clearing House). It’s the network that moves money around.

ACH, EFT, and e-check

An e-check is just one type of EFT. Other types include instant wire transfers, bank-to-bank salary transfers, or direct bank deposits, where you put money directly into someone else’s bank account, instead of giving them the cash in person and then having them go to the bank and putting it in their account themselves.

Once a customer authorizes you to draw an e-check from their account, the process happens automatically and they don’t need to take any further action.

For more information on differentiating merchant accounts and payment gateways, or to sign up for a merchant account, please call (888) 924-2743 or go to


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