What is an EFT payment?

EFT payments are simple, fast, and secure ways to pay and get paid. The chances are that you make and receive EFT payments every day — whether it’s getting your salary deposited into your bank account or buying something with your credit card. If you’re wondering — how does an EFT payment work — this guide is for you.

We’ll cover the EFT payment meaning, how to set up EFT payments, and more — and as a bonus we’ll also introduce Wise as a cheap and convenient way to send or receive payments around the world.

EFT payment meaning: what is EFT?

EFT stands for Electronic Funds Transfer. It’s not one specific type of payment, but a group of different payment types including card payments, direct deposits and wire transfers.

The common factor with EFT payments is that the money moves between accounts digitally, with no need for a member of bank staff to intervene.

That also means there’s no need for physical documents like checks or cash, which can speed up processing times and means some EFT payments are extremely cheap to arrange.

We’ll dive into the different types of EFT payments, and what they’re used for, in just a moment.

How does an EFT payment work?

There are always 2 parties in an EFT payment — the sender and the recipient. In most cases, the sender will start off the EFT payment, to push funds to the recipient’s account.

The exact processes followed will depend on the EFT payment type — the sender may swipe their credit card to make a purchase in store for example — or the sender may be a company running payroll and depositing money in employee bank accounts.

Once a payment is initiated, messages are passed on through digital routes to move money from one account to another without any human intervention.

Funds can be moved between bank accounts easily, even when the accounts are held by different institutions — making EFTs a simple and convenient solution for individuals, businesses and institutions alike.

What are the EFT payment types?

Let’s look at a few common EFT payment types:

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How to set up EFT payment step by step

EFT payments are usually super easy to make — and require little effort to receive. Here’s how you go about arranging a few common EFT types.

Get paid salary by EFT

Most employers will offer to pay salary by EFT using a direct deposit. It’s also the most common way to get paid benefits, pensions and other recurring payments because it’s efficient and low cost.

Set up a direct deposit to pay rent or bills

As well as being a handy way to get paid, EFTs are commonly used to make one off and recurring payments, like your rent, utilities or subscriptions.

The exact process to set up a direct deposit EFT yourself will depend on your bank — but you can usually get started online pretty easily:

• Log into your online or mobile banking service

• Navigate to the payments section and select the option to set up a direct deposit

• Enter the recipient’s bank account details and payment amount

• Add the payment date and whether or not it’s a recurring transfer

• Check everything over and confirm

Pay by card online, by phone or in person

The easiest way to make an EFT is probably using your credit or debit card. In this case all you need to do is swipe or tap your card and enter your PIN or sign.

Alternatively you can read out your card details over the phone or enter the details into the merchant’s site if you’re transacting online. The payment will process automatically with no need to take any further steps.

EFT payments FAQ

Let’s take a look at a few common questions relating to EFTs to finish up.

How long does an EFT payment take?

How long an EFT payment takes will depend on the specific transfer type. For example, direct deposits may take a day or two to clear, while ATM withdrawals are usually instant.

Are EFT payments safe?

Generally, yes. Consumers are protected by law under the Electronic Funds Transfer Act which includes provisions for resolving disputes and problems.

Take common sense precautions when using any sort of electronic payment — but EFT payments are normally far safer than using cash or checks which can be lost or stolen more easily.

What’s the difference between an ACH and EFT payment?

All ACH payments are EFTs — but not all EFTs are ACH payments.

ACH payments include direct deposits and electronic bank transfers which are commonly used to send domestic payments, payroll and pensions.

What information do you need to make an EFT payment?

If you’re setting up an EFT direct deposit — to pay your share of the rent for example — you’ll need to get the recipient’s bank details, routing number and full name as shown on their account.