What is an Electronic Funds Transfer?

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What Is EFT or Electronic Funds Transfer And How Does It Work?

An electronic funds transfer (also known as EFT) is a system for transferring money from one bank to another without using paper money. Its use has become widespread with the arrival of personal computers, cheap networks, improved cryptography and the Internet. Since it is affected by financial fraud, the electronic funds transfer act was implemented. This federal law protects the consumer in case a problem arises at the moment of the transaction.

From Where Did It Come?

The history electronic funds transfer originated from the common funds transfer of the past. Since the 19th century, and with the help of telegraphs, funds transfers were an usual thing in commercial transactions. Finally, it migrated itself to computers and became the electronic money transfers of today.

Where Do I Find EFT's

One of the most common EFT's is Direct Deposit. It is used by employers for depositing their employees' salary in a bank account. Other kind of EFT is the automatic charge to your check or savings account. For example, when you are paying a mortgage, the bank will discharge the monthly payment from a pre-accorded bank account. The benefit is that you won't have to go to the bank to do it. It's automatic.

Another kind of EFT is a cash card. With this type of card you can spend a prepaid amount of money until the balance is zero. So, if you wish to make a gift certificate without tying up your beneficiary with one store, you can buy a cash card from your favorite bank.

ATM's are also used for EFT's. Since an automatic teller machine is much cheaper than a group of bank tellers, it has helped to bring costs down and beneficiate the costumer.

Points of sale (also known as POS) are also part of this group. Those little blue or dark blue machines in which you pass your card are doing an electronic fund transfer from your account to the retail account. Imagine how the world without them was. Slow, wasn't it?

What Are The Pros?

The main advantage of an electronic funds transfer is time. Since all the transaction is done automatically and electronically, the bank doesn't need to pay a person to do it, a person to drive the loans to the other bank, the cost of the transport, the cost of the maintenance of the transport, online auto insurance and the gas of the transport. EFT's have revolutionized modern banking.

Other benefit is immediate payment, which brings an up to date cash flow. You won't hear either about lost checks causes by the inefficiency of normal mail (nowadays known as snail mail for its velocity compared to emails) and up to date bookkeeping.

The good thing is that a lot of merchants and consumers have found these advantages and have migrated to EFT's. So it isn't 1995 when only some companies offered this service and only some people used it for buying things and paying their bills. And, as the consumer base increased, also did the type of services and the reduction of transfer prices. EFT's are a good example of the wonders of an open market economy.

the service is trusted and tested daily by the foreign currency exchange specialists who deliver millions of pounds worldwide.

Continue to: Problems with Electronic Funds Transfer