What are eChecks and How Does an eCheck Payment Work

When dealing with clients, accepting eCheck payments or electronic checks is an excellent way for business owners to make financial transactions more convenient. n the world of electronic payments, eChecks are a relatively new and increasingly popular payment option for both consumers and businesses. Today, millions of people in the U.S. prefer paying for goods and services with electronic checks over other modes of payment, including credit cards. As such, adding an eCheck payment option to your website’s checkout page helps increase sales.

But what exactly are electronic checks and how do eChecks work? In this article, we’ll take a closer look at these online payments, assess their benefits, and determine what your business needs to accept electronic checks as one of its payment methods.

Learn More

What are eChecks?

ECheck payments, or electronic checks, are a digital version of a traditional paper checks, and they are rapidly gaining traction in the modern economy due to their convenience, security, and cost-effectiveness. An electronic check or eCheck is a digital version of a paper check that transfers funds from a customer’s checking account into a merchant’s bank account using a payment processor, but instead of writing the check out manually and sending it through the mail, you enter the details into a secure online form. This is considered a type of electronic funds transfer where money is transferred from one financial institution’s account to another account electronically without the direct intervention of the bank’s staff. Electronic funds transfer methods are generally considered more secure than paper checks.

In the United States, eChecks are processed by the Automated Clearing House (ACH) merchant network, an electronic network that processes financial transactions between participating financial institutions like banks. Customers authorize ACH network transactions by signing a contract or using a website, enabling money to be transferred between bank accounts.

What Are Echecks And How Do Echeck Payments Work

How Does eCheck Payment Processing Work?

ECheck Processing is very efficient and consists of three steps:

  • Customer authorization: In addition to signing a paper contract or using an online form, customers can authorize electronic check processing transactions over the phone.
  • Payment set-up: Businesses set up both one-time payments and recurring payments through a payment processing system.
  • Confirming payment: After receiving all payment information, a business submits details through the Automated Clearing House ACH network system to withdraw funds from the client’s account and deposit them into the business’ account. The entire eCheck payment processing procedure usually takes three to five business days.

From the consumer’s perspective, eChecks work similarly to a traditional paper check. They are able to authorize a payment by providing the necessary bank account information, and the payment is initiated and processed by the banks involved. However, unlike a paper check, eChecks are entirely digital and require no physical handling or mailing of documents. This means that eCheck processing can be done much faster than a paper check, with the payment typically clearing within one to two business days.

What Type of Business Transactions use eChecks?

Given the versatility of eChecks, many businesses and clients pay for products and services using electronic checks. These include both small businesses and big companies like PayPal that enable payees to purchase items with eChecks when the buyer doesn’t have a credit card or alternate source of funding attached to their PayPal account. This makes payment more convenient and encourages customers to use PayPal as their online payment method.

Recurring Payments

Because clients can set up electronic checks to make regular recurring payments, eChecks are particularly useful for recurring financial transactions such as:

  • Mortgage payments
  • Car loan payments
  • Monthly rent payments
  • Legal retainer fees

Electronic check processing allows a customer’s payment schedule to be simplified and streamlined via pre-determined payment authorization with the payer’s bank account, which in turn leads to more overall bill payments than traditional one-off payments.

What are the Benefits of Accepting eChecks?

Because they are transmitted electronically, eCheck financial transactions are quicker, safer, and simpler than many other modes of payment. This results in several benefits for both businesses and their clients.

More convenient

Unlike traditional paper checks, a digital eCheck does not need to be deposited at a physical bank and processes nearly twice as fast as a paper check. In 2018, the National Automated Clearinghouse Association (NACHA) updated its guidelines to allow processors to offer same-day funding for customers.

One of the primary benefits of eChecks is their convenience. Because they are entirely digital, eChecks can be initiated and processed from anywhere with an internet connection. This means that consumers can make payments without having to physically visit a bank or mail a check, and merchants can receive payments without having to handle physical checks or wait for them to clear. This convenience can save time and reduce the administrative burden for both consumers and businesses. This is a big advantage for clients who need to make fast transactions.


Processing fees for eChecks tend to be lower than credit card transactions. Because eChecks require no physical handling or mailing, they can be processed at a lower cost than paper checks. These cost savings can be passed on to consumers and businesses, resulting in lower transaction fees and processing costs. Instead of credit card networks, electronic check payments uses the Automated Clearing House (ACH) for processing transactions between participating financial institutions like banks. This eliminates the need for credit card interchange fees, resulting in huge savings for subscription-based businesses that accept recurring payments as well as businesses that accept large payments.

Transfers made by the ACH network also save money since they take place in batches, making them cheaper to process than wire transfers that move money from one bank account to another one transaction at a time.


Switching from paper checks to eCheck payments reduces the 3.6 million tons of greenhouse gas emissions and 67.4 million gallons of fuel expended in transporting paper checks. Not only does this result in additional savings, it also provides a way to show the public that your business cares about reducing its impact on the environment.

Businesses appreciate receiving eCheck payments because checking account numbers and financial institutions don’t change as often as credit card numbers. As a result, clients don’t need to update their financial payment information as often and cash flows in more regularly to the payee’s bank account.


ACH transactions can also be reversed after being initiated, unlike wire transfers, making eCheck transfers more secure for clients. Coupled with the encryption and tokenization that eChecks use to prevent fraud and data theft, eChecks reduce the chance of a business getting a bad payment while securing client payment information.

Given all of these benefits, it’s no wonder that ACH use has been steadily rising. According to NACHA, 6.8 billion ACH payments were processed in the third quarter of 2020. This was a 9% increase from the same quarter in 2019.


Another benefit of eChecks is their security. EChecks are typically processed through the Automated Clearing House ACH network, which is regulated by the Federal Reserve and subject to strict security standards. This means that eChecks are generally considered to be safer than traditional paper checks, which can be lost, stolen, or altered in transit. EChecks also provide a clear digital record of the payment, which can be helpful for tracking and reconciliation purposes.

What are the drawbacks of eChecks?

While eChecks offer many benefits, there are also some potential drawbacks to consider. One of the biggest drawbacks of an eCheck payment is that they can be subject to processing delays and errors. Because eChecks are processed through the ACH network, they must follow strict processing timelines and procedures. If there is any missing or incorrect information, the payment can be delayed or rejected, which can be frustrating for both consumers and businesses.

Another potential drawback of an eCheck payment is that they may not be available as a payment option for all merchant services providers. While many payment processors now accept eChecks, some may only accept credit or debit card payments.

Finally, an eCheck payment may be subject to fraud or unauthorized transactions, just like any other form of electronic payment. Consumers should take care to ensure that they are only providing their bank account information to trusted merchants, and should monitor their accounts closely for any unauthorized transactions.

Overall, the benefits of electronic checks far outweigh the cons. If your business takes large credit card payments regularly and you are looking to reduce your merchant fees and increase your recurring payments, you may want to begin to collect eCheck payments.

What Do Businesses Need to Accept eChecks?

In order for your business to accept eCheck payments from a customer, you must first collect the client’s financial information, including bank account routing number and payer’s checking account numbers. This can easily be done by providing a secure form web page on your website for clients to enter their information. Other businesses obtain this payment information over the phone or in person with a paper form.

Your business will also need to sign up for an ACH merchant account to withdraw customer funds online via an ACH payment. When setting up this account, a business must provide:

  • Its Federal Tax ID Number
  • The name and address of the business
  • The number of years the business has been in operation
  • Transaction processing volumes
  • Bank account number information

Increasing Your Payment Options with eCheck Payment

Adding eChecks as a payment option for your business services offers a safe and convenient way for clients to make financial transactions. Advertising electronic check options on your website helps attract customers and shows your company employs business practices that reduce waste and make payment easier.

In order to make this service as smooth as possible, make sure to choose a payment processor that supports the most popular payment methods in use today.

Stax is a highly-ranked payments platform designed to simplify your payments through subscription-style merchant services.

Contact us to see how we can help your business grow and thrive in the digital world with efficient payment processing. 

Sign Up Blog