EFT Payment: What It Is and How Electronic Funds Transfer Works

EFT Payment Explained

EFT -- Electronic Funds Transfer -- is the broad category covering virtually every digital payment you make or receive. From ACH direct deposits to wire transfers, debit card transactions to peer-to-peer apps, EFT is the underlying mechanism that moves money electronically from one bank account to another. Understanding how EFT works, the different types available, and when to use each helps you manage business payments more efficiently and at lower cost.

What Is EFT?

Electronic Funds Transfer (EFT) refers to any transfer of money between accounts that is initiated electronically -- through computers, ATMs, the internet, or telephone networks -- rather than through paper checks or cash. The term EFT encompasses many distinct payment systems that operate on different networks with different speeds, costs, and risk profiles.

EFT payments are governed by federal law (primarily the Electronic Fund Transfer Act and Regulation E) and processed through established banking networks like the ACH network, Fedwire, and card networks (Visa, Mastercard).

Types of EFT Payments

ACH (Automated Clearing House) transfers -- The most widely used EFT type for business payments. ACH processes batches of transactions through the ACH network operated by NACHA. ACH is used for direct payroll deposits, vendor payments, bill pay, and business-to-business transfers. Standard ACH takes 1-3 business days; same-day ACH is available for a fee (typically $0.25-$1 per transaction).

Wire transfers -- Direct bank-to-bank transfers that settle the same business day (domestic) or 1-2 days (international). Wire transfers are used for large, time-sensitive, or international payments. They are faster and more final than ACH but more expensive: domestic wires typically cost $15-$35 to send, $10-$20 to receive.

Debit card transactions -- A form of EFT that draws directly from the payer's bank account. Debit card payments processed through card networks typically settle in 1-2 business days.

Credit card payments -- Though funded by credit rather than a bank account, credit card processing uses EFT networks for authorization and settlement. Settlement typically occurs 1-2 business days after the transaction.

Online banking transfers -- Transfers initiated through online banking portals, including peer-to-peer payment systems like Zelle (which uses ACH), PayPal's bank transfer option, and similar services.

Direct deposit -- A specific application of ACH EFT used to credit employee bank accounts with payroll. Direct deposit is the standard way US employers pay wages.

EFT for Business Invoicing

For freelancers and small businesses, the most relevant EFT types are ACH bank transfer and wire transfers for collecting invoice payments.

ACH payment collection -- Many invoicing platforms (including Eonebill) allow clients to pay invoices via ACH bank transfer. ACH payments typically cost less to process than credit cards (often a flat $0.25-$1 per transaction versus 2-3% of transaction value for card payments). For large invoices, the difference is substantial: on a $5,000 invoice, ACH fees are under $1 while card fees run $100-$150.

Wire transfers -- For international clients or very large invoices, wire transfers are the standard payment method. Provide your bank's routing number, account number, SWIFT code (for international wires), and bank address. International wires may involve correspondent bank fees that reduce the amount you receive.

Accept both payment methods through Eonebill's invoicing platform for maximum payment flexibility. See also invoice payment methods guide for a full comparison of payment options.

EFT Security and Fraud Protection

EFT payments are protected by federal law under Regulation E. For consumer accounts, if you report an unauthorized EFT within 2 business days, liability is limited to $50. For business accounts, protections are weaker -- businesses should implement internal controls and verify payment instructions directly when receiving new banking details from vendors.

Common EFT fraud vectors include:

• Business email compromise (BEC) -- fraudulent emails requesting changes to payment routing information
• ACH fraud -- unauthorized debits from business accounts
• Phishing attacks targeting online banking credentials

Always verify new banking instructions by calling the payee directly at a known phone number before initiating wire transfers or changing ACH details.

EFT vs Check: The Comparison

| Feature | EFT (ACH) | Paper Check |

|---|---|---|

| Speed | 1-3 days | 3-7 days |

| Cost | $0-$1 | $0.50-$2+ |

| Risk | Low to medium | Higher (check fraud) |

| Convenience | High | Low |

| Reversibility | Limited | Higher |

For most business payments, EFT is faster, cheaper, and safer than checks. The primary exception is situations requiring a paper trail with physical signature authorization.

Review your online payment methods options and set up efficient EFT payment collection through Eonebill's invoice platform.

EFT Security Best Practices for Businesses

Electronic payments are generally secure, but businesses face specific fraud vectors worth understanding and guarding against.

Business email compromise (BEC) targeting wire transfers: This is the most costly form of EFT fraud for businesses. A fraudster gains access to email communications (or convincingly spoofs them) and sends a message appearing to be from a vendor, client, or internal executive requesting a change to payment routing information. Employees following instructions change the wire destination -- and funds are sent to a fraudulent account.

Prevention: Establish a policy that any change to payment routing information must be verified by phone at a known number (not a number provided in the same email requesting the change). This one control prevents the vast majority of BEC losses.

ACH debit fraud: Fraudsters who obtain your bank account number and routing number can initiate unauthorized ACH debits against your account. Prevention: use ACH debit blocks or filters (offered by most banks) that allow only pre-authorized companies to initiate ACH debits from your account.

Phishing targeting online banking credentials: Standard phishing emails attempt to capture your online banking login credentials. Use multi-factor authentication (MFA) on all banking portals and never click links in emails claiming to be from your bank -- go directly to the bank website by typing the address.

Reconciling EFT Payments in Your Books

Every EFT payment received should be matched to the corresponding invoice in your accounting records. The reconciliation process:

1. Invoice is issued in your invoicing system (e.g., Eonebill)
2. EFT payment is received and appears in your bank account
3. Bank transaction is matched to the open invoice in your invoicing system
4. Invoice is marked as paid; accounts receivable is cleared

When using Eonebill, ACH and card payments received through invoice payment links are automatically reconciled -- the invoice status updates to "paid" when payment is confirmed. This eliminates manual reconciliation for most transactions.

For larger businesses with high payment volumes, an automated bank reconciliation workflow prevents the manual work from becoming a bottleneck.

See related guides: invoice payment methods for a full comparison of payment options, and online payment methods for broader context on building your payment infrastructure.

EFT Payment Security and Best Practices

EFT is secure, but security is not automatic. The ACH network has fraud detection systems, but individual users must also follow best practices to protect their accounts and payments.

Verify new banking information: Before sending any EFT payment to a new recipient, verify their banking details through a secondary channel. Email-based fraud ("the vendor changed their bank account") is common and costly. Call your contact at the vendor to confirm before changing any payment routing.

Use positive pay and ACH blocks: Most business bank accounts offer "ACH positive pay" or "ACH filter" services that block unauthorized debits. Set up these controls to prevent fraudulent withdrawals from your account.

Monitor your account daily: EFT transactions settle in 1-3 business days, but alerts can be set up to notify you of any debit the moment it is initiated. Enable transaction alerts on your business checking account.

Limit authorization amounts: When setting up ACH debit authorizations for recurring payments (utilities, subscriptions), confirm the exact amount and whether the authorization is open-ended or capped. Dispute any EFT transaction you did not authorize within 60 days to get the full protection of the Electronic Fund Transfer Act.

EFT for Freelancers Receiving Client Payments

Accepting EFT from clients is one of the fastest ways to get paid without credit card fees. To set up EFT receipt: share your bank's routing number and account number (for one-time ACH credits), or use a payment service like Stripe ACH Direct Debit or PayPal that handles the authorization workflow for you. Eonebill supports multiple payment methods including ACH -- see the invoice payment methods guide for a comparison of fees and settlement speeds. Combine EFT with professional invoice templates that include your banking details and clear payment instructions to minimize back-and-forth with clients.

EFT vs. Wire Transfer: Choosing for Large Payments

For payments above $10,000, the choice between ACH (a type of EFT) and wire transfer involves real trade-offs. ACH is cheaper (often free for the sender, $0-$1.50 for the receiver) but takes 1-3 business days and has daily dollar limits that vary by bank and processor. Wire transfer costs $15-$35 but settles the same business day and has no practical upper limit for domestic transfers. For most business payments under $25,000, ACH is the right choice -- the lower cost and slightly longer processing time is worth it. For time-sensitive payments or very large transactions (equipment purchases, security deposits, large project retainers), wire transfer's same-day settlement justifies the fee. Some banks offer "Same Day ACH" as a middle option -- same-day settlement at roughly $3-$5 per transaction -- which fills the gap between standard ACH and wire for moderate-sized payments. See Eonebill's accepted payment methods and the invoice payment methods comparison for more context on setting up your preferred payment options.