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Background
What is check conversion?
Check conversion is the process of converting payments from a paper check into an electronic payment. Also known as electronic check processing, check conversion increases the security of consumer and business payments while saving financial institutions and businesses time and money. Check conversion results in fewer bad checks, earlier fraud detection and fewer errors. The system used to convert paper checks to electronic transactions — the Automated Clearing House (ACH) — has been used for more than 30 years for direct deposit and direct payment, and is the most secure network available.
How check conversion works
- A consumer or business writes a paper check and gives it to a cashier at a store or sends it to a biller through the mail.
- If a retailer or biller plans to electronically convert a check, they must inform the consumer or business at the checkout counter or through written notice.
- The information pertinent to the check payment is automatically captured, including the routing, account and check serial numbers, the business receiving the check, and the date and amount of the transaction.
- The data captured is presented to the consumer’s financial institution and their account is debited. Processing the check electronically significantly reduces the possibility for human error and increases the accuracy and speed of processing.
- The retailer or biller creates a digital image of the entire check and destroys the original paper document. The image is archived for two years to allow for accurate record keeping.
- The consumer’s bank statement will detail the payment, which may appear similar to a check listing, or show up as an Electronic Funds Transfer (EFT), similar to an ATM withdrawal or direct payment.
Benefits of check conversion
- Check conversion saves time and money by reducing resources needed to process paper checks. The Federal Reserve estimates that the U.S. economy saves $1.62 per electronic transaction versus a paper check.
- The ACH network that processes payments electronically is a safe, reliable system that has been in existence for more than 30 years. This history of secure transactions means businesses and consumers can rest assured their check payments are processed safely and efficiently.
- Checks converted to electronic transactions clear faster and travel through less hands than checks processed traditionally, reducing the chance for theft, loss and fraud.
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