Within the past decade the electronic funds transfer was introduced to account holders and after some initial scepticism, online banking became the favoured way to transact bank account business online primarily because of the convenience and ease. Initially, account holders could only do things like log in and check their account balance and review statements. Over time, such account features like electronic funds transfer (EFT) allowed individuals to be able to transfer money between internal and external accounts and make authorized bill payments all without leaving the privacy and comfort of their own home. Essentially, an electronic funds transfer is an electronic check where the beneficiary is the account holder or another authorized person or entity. This was advantageous to people because it lessened the necessity to have to go into a bricks and mortar bank to get a bank teller to do things like perform a bank account transfer. This account feature was putting control into the hands of the account holder. The concept of electronic funds transfer includes things like wire transfers (guaranteed by the Federal Reserve’s FedWire system), Automated Clearing House (ACH) transfers, and even electronic bill payments.

In order to effect an electronic funds transfer, an individual will need information like the routing number and the bank account number of the beneficiary account. In order to ensure that the account that is receiving the funds belongs to the acount holder, this information is required. Generally, when an individual wants to perform a bank account transfer, the account that is receiving the funds must be in the name of the account holder. This is to mitigate the likelihood of fraud. If an individual wants to effect a wire transfer into the account of a different person, an individual can only perform a wire transfer and this typically has to be done at the bank, again in order to lessen the likelihood of fraud. Online bill payments have to be in the account holder’s name as well, and in order to perform an EFT for a bill payment, you will need the account numbers for all of your bills (i.e. credit cards, utilities, etc.)

Electronic funds transfers or bank account transfers are generally much safer than paper checks for those reasons alone. It is very easy for a person to intercept a personal check, counterfeit it, and pass it along for payment. However, because of the rigorous account checking that goes into an EFT, this limits the likelihood of a fraudster stealing your money.