What is an Electronic Fund Transfer?
Electronic banking also known as electronic fund transfers (EFTs) use computer and electronic technology in place of checks and other paper transactions. EFTs are initiated through devices such as cards or codes that let you, or those you authorize, access your account. Many financial institutions use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose. Some use other types of cards require your signature or a scan. The electronic transfer of money occurs from one financial institution account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of financial institution staff.
Understanding Electronic Fund Transfers
To understand your rights and responsibilities for your EFTs, read the documents you receive from the financial institution that issued your "access device" – the card, code or other way you access your account to transfer money electronically. Although the method varies by financial institution, it often involves a card and/or a PIN. No one should know your PIN but you. You also should read the documents you receive for your account, which may contain more information about EFTs.
Types of Electronic Banking Services
There are various ways electronic transfers may occur. These include the following.
ATMS are electronic terminals that let you bank almost virtually any time. To withdraw cash, make deposits, or transfer funds between accounts, you generally insert an ATM Card and enter your Pin. Some financial institutions and ATM Owners change a fee, particularly if you don’t have accounts with them or if your transactions take place at remote locations. Generally, ATMS must tell you they charge a fee and the amount on or at the terminal screen before you complete the transaction.
Direct Deposits lets you authorize specific deposits — like paychecks, Social Security checks, and other benefits — to your account on a regular basis. You also may pre-authorize direct withdrawals so that recurring bills — like insurance premiums, mortgages, utility bills, and gym memberships — are paid automatically. Be cautious before you pre-authorize recurring withdrawals to pay companies you aren't familiar with; funds from your bank account could be withdrawn improperly. Monitor your bank account to make sure direct recurring payments take place and are for the right amount.
Pay-by-Phone Systems let you call your financial institution with instructions to pay certain bills or to transfer funds between accounts. You must have an agreement with your institution to make these transfers.
Personal Computer Banking lets you handle many banking transactions using your personal computer. For example, you may use your computer to request transfers between accounts and pay bills electronically.
Debit Card Purchase or Payment Transactions let you make purchases or payments with a debit card, which also may be your ATM card. Transactions can take place in-person, online, or by phone. The process is similar to using a credit card, with some important exceptions: a debit card purchase or payment transfers money quickly from your bank account to the company's account, so you have to have sufficient funds in your account to cover your purchase. Be sure you know the store or business before you provide your debit card information to avoid the possible loss of funds through fraud. Your liability for unauthorized use, and your rights for dealing with errors, may be different for a debit card than a credit card.
Electronic Check Conversion converts a paper check into an electronic payment in a store or when a company gets your check in the mail.
Discontinuing Electronic Banking Services
Lost or Stolen ATM or Debit Cards
If you credit card is lost or stolen, you can’t lose more than $50. If someone uses your ATM or debit card without your permission, you can lose much more. If you report an ATM or debit card missing to the institution that issues the card before someone uses the card without your permission, you can’t be responsible for any authorized withdrawals. But if unauthorized use occurs before you report it, the If you credit card is lost or stolen, you can’t lose more than $50. Learn more about Lost or Stolen ATM or Debit Cards (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) .
Discontinue Direct Deposits
Depending on the rules specific to the company from which you are receiving direct deposit payments, the steps to discontinue direct deposit vary. There are a few guidelines that all employers and financial institutions generally require to stop receiving your pay by direct deposit. Check with your human resources department where you work to see what is required to discontinue direct deposit and ask for a new direct deposit authorization form. If you receive direct deposit payments from somewhere other than an employer, such as from a retirement fund or annuity, social security payments, write a letter to the company from which your receive payments stating that you would like to discontinue direct deposit.
TIP: Don’t expect the change to happen immediately. Discontinuing direct deposit will take at least one to two full pay periods before the change takes effect if it is a payroll check. If it is an entity other than an employer, it will take one to two months before the change takes effect.
EFT Stop Payment Privileges
When you use an electronic fund transfer, the EFT Act does not give you the right to stop payment. If your purchase is defective or your order isn’t delivered, it’s as if you paid cash: it’s up to you to resolve the problem with the seller and get your money back. There is one exception. If you arranged for recurring payments out of your account to third parties, like insurance companies or utilities, you can stop payment if you notify your institution at least three business days before the scheduled transfer. You can notify the bank orally or in writing.
You have 60 days from the date a periodic statement containing a problem or error was sent to you to notify your financial institution. The best way to protect yourself if an error occurs is to notify the financial institution by certified letter. Under federal law, the institution has no obligation to conduct an investigation if you miss the 60-day deadline.