Legal Definitions - electronic funds transfer

An electronic funds transfer (EFT) is a transaction that moves money from one bank account to another using electronic systems, rather than physical cash, checks, or other paper documents. These transfers can be initiated through various digital channels, such as computers, mobile phones, or automated teller machines (ATMs), allowing for quick and efficient movement of money between individuals, businesses, or financial institutions.

• Example 1: Paying a Utility Bill Online

  Scenario: Maria receives her monthly internet bill and decides to pay it directly through her bank's online banking portal. She logs in, selects the internet provider as a payee, enters the amount due, and authorizes the payment.

  Explanation: This is an electronic funds transfer because Maria's bank electronically debits her checking account and credits the internet provider's bank account. No physical check is written or mailed, and no cash is exchanged; the entire transaction occurs digitally between the financial institutions involved.

• Example 2: Direct Deposit for Payroll

  Scenario: John works for a company that pays its employees through direct deposit. Every two weeks, his salary is automatically transferred from his employer's business bank account directly into his personal savings account.

  Explanation: This demonstrates an EFT because the employer initiates an electronic instruction to transfer funds from their bank to John's bank. The money moves digitally between the accounts without the need for a physical paycheck, making it a convenient and secure method of payment.

• Example 3: Sending Money via a Mobile Payment App

  Scenario: Emily wants to send her friend, Alex, $75 to cover her share of a concert ticket. She uses a popular mobile payment application on her smartphone to instantly transfer the money from her linked bank account to Alex's account within the app.

  Explanation: This is an EFT because Emily uses a digital platform (the mobile app) to send an electronic instruction for funds to move from her bank account to Alex's. The transaction is completed electronically, bypassing the need for cash or a check, and the money is typically available to Alex almost immediately.