What is an EFT payment?

Gabriela Peratello

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.

📑 Table of Contents

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:

Payment typeDescription
Wire transfers

Wire transfers are a fast way to move money from one account to another. 

They can be sent domestically or internationally, and are processed immediately once they’re initiated. 

However, they can be costly, and so they’re more commonly used when sending high value payments, or when speed is essential.

Electronic checks (e-checks)

Electronic checks work just like traditional paper checks — but without requiring the physical piece of paper. 

Instead all you need is the routing number and account details for the person you want to pay.

Direct deposits

Direct deposits are also sometimes referred to as ACH payments, and in the US they’re operated by Nacha¹. 

96% of Americans get their salary via a direct deposit, as a simple, fast and convenient way to pay a large number of people all at once.

Card transactions

Whenever you spend in a store or restaurant with your credit or debit card you’re initiating an EFT payment. 

When you swipe or tap your card the payment terminal will start the transfer process, to move the money you’re spending from your account to the merchant.

Virtual/online transactionsSpending with your card online is another EFT transfer — in this case you set off the transfer from your account to the merchant account when you enter your card details — the payment then processes automatically.
Phone paymentsPhone payments are also EFTs — in this case you’ll likely give your card details to a merchant over the phone who will enter them into a payment terminal to initiate the transfer.
ATM payments

Finally, when you withdraw cash from an ATM at home or abroad, you’re using another form of EFT. 

The ATM terminal will initiate the transfer from your account, and inform your bank you’ve taken the cash.

Send money to or from the US with Wise

Sending payments electronically makes life easier — but if you need to transfer money internationally, you’ll likely find your bank charges high fees and offers a poor exchange rate.

Beat bad rates — and cut your international payment costs significantly with Wise.

Wise is a specialist in online and mobile payments, which uses the real exchange rate and low, transparent fees.

That means you can save 6x compared to using your normal bank to send money abroad. Fund your payment by local ACH, wire transfer, with a credit card or debit card to send payments to 80+ countries with the mid-market exchange rate.

45% of Wise payments arrive instantly, and almost all are deposited within 24 hours, meaning you can save time as well as money compared to using your normal bank.

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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.

To get paid your salary by EFT you’ll need to
  • Ask your employer for their direct deposit form, which may be available online or as a paper document

  • Enter your bank account details and sign 

  • Submit the form to your employer electronically or by hand

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.

Learn more about what is ACH with our handy guide

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.


  1. Nacha

Source checked on 07.21.2022

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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