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Electronic Funds Transfer (EFT) Explained

Haley Rogers • August 29, 2023

Whether you’re a business owner paying employees or an individual paying a friend for a group dinner, you’re most likely using some form of electronic payment method. These electronic payments are also called electronic funds transfers (EFTs).

Here’s everything you need to know about EFTs – one of today’s more convenient and reliable payment options.

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What is an electronic funds transfer?

An electronic funds transfer is the digital movement of money from one account to another in order to pay a person or business. These transfers can be electronically initiated via computer, phone, e-check, or electronic terminal.

Many EFTs are done through money transfer apps like Zelle® or Chime’s Pay Anyone feature – a Venmo alternative that allows you to send money to your friends and family, regardless of who they bank with.

EFTs can also be done through automated clearing house (ACH) transactions, wire transfers, payments authorized over the phone, or digital wallets. Ultimately, any electronic transfer of funds that doesn’t include physical cash exchange can be considered an EFT.

How does the EFT process work?

An EFT involves two parties: the sender of the funds and the recipient. Once the sender initiates the money transfer, the funds go through a series of digital networks to the sender’s bank and then to the recipient’s bank. The two accounts can be at the same financial institution or different ones.

What is the processing time for EFT payments?

Domestic EFT payments are typically cleared and completed in up to three business days (but often before that if the transfer is within the same bank).1

International EFT payments may take longer to transfer – potentially up to five business days, depending on the destination – and may come with more fees and restrictions.

Types of EFTs

Many electronic payments fall under the EFT category. Here are the most common, easy ways to send money:

  • Automated Clearing House (ACH) payments: These are EFT payments that go through the ACH (a major network for moving money between banks), often made as credit or debit.
  • Peer-to-peer (P2P): A common type of EFT is a P2P payment via money transfer apps like Pay Anyone, Venmo, or any other P2P platforms.
  • E-checks: E-checks are the digital versions of checks, in which you enter your routing and bank account numbers to make a payment.
  • Direct deposit: Employees have to set up direct deposit with employers, but then they receive an automatic deposit each month from their employer to their account.
  • ATMs: You can make instant withdrawals or deposits at the ATM kiosk without going into the bank.
  • Wire transfers: This type of EFT is often used for moving larger amounts of money (a house down payment, for example) directly from one account to another, typically for a fee.
  • Card transactions: These are point-of-sale transactions in which a debit and credit card are used (essentially the card’s digital swipe, tap, or chip entry).
  • Pay-by-phone: A sender can give the recipient their card information and payment authorization over the phone.
Set up direct deposit with Chime to receive your paycheck up to two days early.*

Benefits of an electronic funds transfer

EFTs are a preferred method of payment because they:

  • Are more efficient and convenient
  • Typically require no paperwork (except when you set up direct deposit)
  • Require little effort to enter your payment information, authorize a digital wallet payment, or send money via an app
  • Allow businesses to operate globally and receive payments worldwide
  • Do not require postage or checks
  • Provide simple tracking

EFT vs. ACH: What's the difference?

All ACH payments are a type of EFT, but not all EFTs are ACH payments.

ACH transfers are electronic funds transfers between two financial institutions that pass through the Automated Clearing House network. The primary difference between ACH and EFT transactions is that ACH transfers are specifically done over the ACH network and are executed in batches.

EFT vs. wire transfers

EFTs and wire transfers have the same relationship as EFTs and ACH transactions. While ACH transfers are done over the Automated Clearing House network, wire transfers are facilitated by the Federal Reserve and pass through the Federal Reserve Wire Network.

Are EFTs safe?

Sharing your payment information with a business or setting up automatic payments to a vendor each month might feel risky. However, EFTs are more reliable than cash payments or writing and mailing a physical check.

EFTs have security through the Electronic Fund Transfer Act (EFTA), which protects consumers by limiting losses from unauthorized transactions in accounts at banks, loan associations, and credit unions. The act may allow reimbursement of illegally transferred funds if you report fraudulent activity within the specified timeframe.2

This regulation also holds banks accountable for any violations of the act, allowing you to recoup any losses in court. In accordance with the EFTA, your bank also sets daily withdrawal limits to help prevent excessive losses from fraudulent activity or withdrawals on your account.

Electronic funds transfers: quick and easy

EFTs are a safe and seamless way to move money in your day-to-day life. EFTs can keep your bills on track and make it easy to pay a friend back.

Still, use caution when sending money electronically. Know who you’re paying, double-check the vendor and recipient’s information, and only use apps that you trust and are well-vetted.

Eager for payday? Find out what time direct deposit hits.

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  • Checking Account with no monthly fees
  • 50,000+ fee-free ATMs~
  • Chime Visa® Debit Card
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Chime® is a financial technology company, not a bank. Banking services are provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card and the Chime Credit Builder Visa® Credit Card are issued by The Bancorp Bank, N.A. or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit and credit cards are accepted. Please see the back of your Card for its issuing bank.

While Chime doesn’t issue personal checkbooks to write checks, Chime Checkbook gives you the freedom to send checks to anyone, anytime, from anywhere. See your issuing bank’s Deposit Account Agreement for full Chime Checkbook details.

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Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank, N.A. and Stride Bank, N.A. (“Banks”). Banks are not responsible for the accuracy of any content provided by author(s) or contributor(s).

* Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.

1 Information from Western Union's “How long does a bank transfer take?" as of August 27, 2023:

2 Information from the Federal Trade Commission's "Electronic Fund Transfer Act" as of August 18, 2023:

~ Out-of-network ATM withdrawal and over the counter advance fees may apply.

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