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Even if you've never heard of electronic funds transfers (EFTs), you likely use them every day without even realizing it.
EFT is a broad term that describes moving money from one bank account to another; this includes your automatic bill payments, sending money on Venmo, receiving your paycheck via direct deposit and other transactions. It covers money transfers between accounts at the same bank or credit union and from one financial institution to another.
While EFTs are generally fast and secure compared to physical checks, they can potentially contain errors or be used for fraud, so it's important to know how to protect yourself and your money.
What Is an Electronic Funds Transfer?
An EFT payment, put simply, is a way to send or receive money between bank accounts without the need for paper checks or cash. They encompass a wide variety of transactions and may also be called electronic payments or e-checks. They do not include accounts for loans or credit; EFTs refer to moving money between deposit accounts like checking or savings.
Some EFTs happen nearly instantly, such as when you're sending money with a peer-to-peer (P2P) payment app, or if you're paying with a digital wallet on a mobile phone. Traditional EFTs—such as when you submit payment for a bill—can take between one and three business days to process.
Types of Electronic Funds Transfers
Electronic funds transfer is a broad term for all kinds of transactions between financial institutions, bank accounts or people. EFTs are everywhere; you likely use them in your daily life for situations such as:
- P2P payments, when sending funds to someone with transfer services like Zelle or PayPal
- Making a payment at a retailer with a debit card or your phone's digital wallet
- Direct deposits, like a paycheck or government benefit that's sent to your bank account
- Online or telephone bill payments, such as when you set up autopay for a utility bill
- Retirement or investment contributions that pull money from another account
- Making transfers with an ATM
- Automated Clearing House (ACH) transfers and wire transfers between bank accounts
Are EFT Payments Safe?
Generally speaking, EFTs are safe. They're especially more secure and faster than their predecessor, the paper check, which can take a couple days to clear. That doesn't mean EFTs are without risk, though.
Some EFTs, such as peer-to-peer payments, are nearly instant. The speed can be a perk, but if you send money to the wrong person, it may be difficult to get back. If you lost money on a payment app due to fraud, however, you might be able to get your money back from the financial institution.
That's because EFTs have certain protections under the Electronic Fund Transfer Act (EFTA), which outlines an error resolution process and limits consumer liability. Unfortunately, you don't have as much protection with EFTs as you do with credit cards, since real money is moved in transactions—sometimes immediately. That means it's harder to recover than when someone racks up fraudulent charges on a credit card. This law isn't perfect, but it can help consumers who experience losses from unauthorized transfers.
The level of protection depends on how fast you catch it and notify your bank, and how the money was taken. If you've experienced an unauthorized EFT because you lost—or someone stole—your debit card or PIN and accessed your account, you have a limited window to report it. If you notify your financial institution within two business days, you won't be liable for more than $50. Beyond that, you may be liable for up to $500 or have full liability and not get any money back, but policies can vary by financial institution.
EFTs also come with a risk of erroneous transactions. For example, a utility company may accidentally overcharge you. Under the EFTA, consumers have some rights to get money back from EFT errors that weren't their fault.
How to Keep Electronic Funds Transfers Secure
In general, EFTs are a very safe and convenient way to send money and receive payment. Yet it remains possible that you'll experience an unauthorized transfer, whether due to fraud or an error. Use these strategies to help protect yourself when using EFTs:
- Check your statements and accounts frequently. You only have a limited time to report unauthorized or erroneous EFTs without any, or with limited, liability. If you aren't looking at your accounts often and you don't catch a fraudulent transfer until over two months later, you may not have recourse to get your money back. Make sure to regularly review your transactions and statements for anything that doesn't look right.
- Be diligent with P2P payments. Whenever you're paying someone (especially someone new) on a P2P app like Venmo, Cash App or Zelle, look very carefully at their account or user information. Triple check and confirm their username with them, because if you accidentally send money to the wrong account, you may not get it back.
- Look out for scams. It's important to remain vigilant for phishing and fraud attempts, which can result in unauthorized EFTs. Some fraudsters use scams that involve getting a victim to pay them via a P2P app. Do not give out your bank account information to anyone you don't know, especially to someone who calls, emails or texts you. If a person reaches out saying they're with your bank or a business you use, stop communicating with them, look up the official number and call to find out if that contact was legitimate or a scam. Additionally, never send money on a P2P to someone you don't know, and don't click on links from emails or texts that you don't recognize.
The Bottom Line
While EFTs are extremely common and generally safe, they're not without risk. Beyond those tactics above to help protect yourself, another tool at your disposal is Experian IdentityWorksSM. These plans scan the dark web and monitor for identity theft and privacy, working to protect and remove your information. You'll also get notified if there are changes to your online information or credit report, so if you are the victim of fraud or identity theft, you'll know quickly. As you now know, if money has left your account via unauthorized EFT, time is of the essence if you want your money back.