Legal Definitions - EFT

EFT stands for Electronic Funds Transfer.

An Electronic Funds Transfer (EFT) is any transaction where money is moved from one bank account to another using electronic systems, rather than physical cash, checks, or other paper-based methods. These transfers are typically processed through computer networks and can occur between accounts at the same financial institution or different ones, enabling quick and efficient movement of funds.

• Example 1: Direct Deposit of Salary

  When an employer pays their employees, they often use direct deposit. Instead of issuing physical paychecks, the employer's bank electronically sends each employee's net pay directly into their designated bank account on payday.

  This illustrates an EFT because the funds are transferred digitally from the employer's bank to the employee's bank account without any physical currency or paper checks involved.

• Example 2: Online Bill Payment

  A homeowner uses their bank's online portal to pay their monthly electricity bill. They log in, select the utility company, enter the amount, and authorize the payment. The bank then electronically sends the funds to the utility company's bank account.

  This is an EFT because the homeowner's bank initiates an electronic transfer of money from their account to the utility company's account, eliminating the need for a physical check or cash payment.

• Example 3: Debit Card Purchase

  A customer buys groceries at a supermarket and pays by swiping or tapping their debit card at the checkout terminal. The amount of the purchase is immediately deducted from their checking account and transferred to the supermarket's bank account.

  This demonstrates an EFT as the payment involves an instant electronic movement of funds from the customer's bank account to the merchant's bank account at the point of sale.