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Electronic Checks

How Electronic Check Conversion Works


When you write a check, you may assume that the piece of paper you write on will be deposited at a bank and processed manually. Electronic check conversion makes that process less and less likely. Instead of processing the piece of paper, some businesses prefer to turn your paper check into an electronic check.

How Electronic Checks Work

How does a piece of paper become an electronic check? The business you write the check to slips the check into a machine that reads information from your check. That information is all the business needs to collect money from your bank account.

Impact of Electronic Checks

Electronic checks allow businesses to process payments more quickly. As a result, the money will come out of your checking account sooner than you might expect. You need to make sure you have enough money in your account when you write a check, and you can’t rely on ‘float’ time as much as you might have in the past. Keep a balanced checkbook and consider some type of overdraft protection plan.

Since you’re paying electronically anyway, you now have even less reason to write checks the old fashioned way.

Where Electronic Check Conversion Happens

Your paper checks may be converted to electronic checks right in front of you, or it may happen when you mail a check to somebody to pay a bill. Either way, they’re making an electronic check so that they can process your payment electronically.

Electronic check conversion is different from substitute checks, which are used between banks under the Check 21 law.

Electronic Check Disclosure and Identification

Businesses are supposed to notify you that they’re making an electronic check. If you’re in a store, there should be a sign near the register that says they’ll turn your paper check into an electronic check. If you’re mailing in a check to pay a bill, the company probably disclosed their electronic check policy somewhere in the fine print of an agreement or on the back of your statement.

If the cashier drops your check into a machine and hands it back to you when you make a purchase, they’ve used an electronic check.

Electronic Check Problems

Mistakes happen. Contact your bank immediately if you find errors as a result of an electronic check transaction. You must notify your bank within 60 days of when the error appeared on your statement or you may lose some rights. For details, see what the regulators say about electronic checks:

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