Pay Off Debt Electronically

Technology makes it easy and convenient for you to make payments on your debt. There are three types of Electronic Fund Transfer (EFT) payment options:

Regardless of what method you use, the important thing is to make the payment in a timely manner to ensure that your credit rating is not affected. Here are some helpful tips to consider when using each of the EFT payment options.

Consider Timing.

Be aware that EFTs are debited from your account quite quickly. Therefore, it is important you have enough funds in your account to cover the transaction at the time of the purchase. Failure to have enough funds could result in a service fee that could be recorded negatively on your consumer report.

Be Secure.

To avoid fraudulent use of your account, you must keep your personal information, such as your personal identification number (PIN), secure. It is also important not to choose a PIN that another person could easily obtain, such as the last four digits of your Social Security Number or your birthday.

To avoid fraudulent withdrawals from your account, be extremely cautious when sharing your banking information over the phone, the Internet or e-mail. Ensure you know with whom you are dealing. Whenever giving out account information over the phone, make sure you initiated the call. Do not, under any circumstances, give account information over the phone when you have received a call, even when the caller claims to be from your financial institution. Take their number and call them back to verify that it is a legitimate call. Protect yourself and your money. Don't let scam artists use your financial information to commit fraud or identity theft.

Your payment will appear on your monthly bank statement. The payment information should include the name of the merchant or business, the payment amount, the date the payment was transferred from your account and the location of the transaction. You should verify this information with your receipts or canceled checks to ensure the payment was processed accurately. If you see an error, such as the amount was debited twice from your account, you have 60 days from the date your statement was sent to notify the financial institution of any errors. Your financial institution then has a duty to investigate the error and has 45 days to do so.

Read the Documents.

It is important to understand your rights and responsibilities regarding EFTs. This can be accomplished by reading the documents that come from your financial institutions regarding your accounts.

For instance, a merchant is required by law to notify you if your check will be processed electronically. When a merchant processes your check electronically in person (at the point of sale), the merchant is required to either post a sign at the register or provide you with a written notice that your check will be converted into an electronic transaction. For mailed checks, the merchant must include a notice in your statement or in its terms and conditions. In addition, the law requires the merchant to give you notice if the merchant will electronically collect a service fee if you do not have enough funds in your account to cover the transaction.

You may not be able to obtain duplicate or canceled copies of your check from your financial institution, so it is important to retain either the voided check or the receipt for proof of payment and your own records. Additionally, you should compare your records of your transactions with your monthly statements to ensure accuracy.


A pay-by-phone transaction is often referred to as a Telephone-Initiated Entry, or TEL. TEL transactions allow a business to process your payment over the telephone. In order for the business to remove money from your account, you must provide verbal authorization to the business. Once you have provided proper authorization, the merchant will request your account information which will be used to debit your account (remove the funds) only for the amount that you have authorized.

The business is required to provide you with this information during the telephone call:

  • The date on or after which your account will be debited.
  • The amount of the debit to your account.
  • Your name.
  • A telephone number for the business that is available and answered during normal business hours.
  • The date of your oral authorization.
  • A statement that the authorization obtained from you will be used to originate an ACH (Automatic Clearing House) debit entry.

Additional Facts Regarding TELs

  • A TEL entry is a one-time debit. You cannot authorize a series of TEL entries.
  • You must give a separate authorization to a business for each TEL transaction.
  • Because a TEL takes place over the phone, there is no paper check created.
  • Record each transaction and request a receipt from the business. This will allow you to maintain accurate records of your financial account.

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Pay Over the Internet

An Internet transaction is often referred to as an Internet-Initiated Entry, or WEB. These transactions allow a merchant or business to debit your account based on information provided over the Internet. In order for the merchant to debit your account, you must provide authorization, in writing and signed or similarly authenticated by you over the Internet. Even if you authenticate yourself when logging onto a Web site, a separate authentication must take place when you authorize the transaction. Such authentication could be provided by asking you to re-enter your personal identification number (PIN) or password to authenticate your identity when authorizing the debit. Generally, existing customers can be authenticated by a shared secret PIN, password or previous transaction history between you and the merchant.

The merchant or business is required to provide you with particular information during the transaction over the Internet. The following information must be provided:

  • Express authorization language.
  • Amount of the transaction.
  • The name of your financial institution.
  • Your account number.
  • Your financial institution's routing number.
  • Information regarding revoking authorization (for purposes of recurring payments only).

A WEB entry can be a series of debits or a one-time debit, depending upon the number of debits authorized. Similar to TEL debits, you will not create a paper check for the transaction, as the debit is processed over the Internet. Thus, it is important to record each transaction and request a receipt from the merchant to maintain accurate records of your financial account. The business or merchant must provide you with a hard copy of the authorization upon your request.

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Conversion of Paper Check

Paper checks can be converted to an electronic transaction through a variety of methods. Each of the following types of check conversion is a one-time debit. You may not authorize a series of these debits, as you must provide a new paper check to be converted for each debit.

Point-of-Purchase (POP).

One type of check conversion is commonly called a point-of-purchase (POP) entry. A POP entry is a debit to a consumer's account for a purchase made in person at the point of sale. A POP entry occurs when you give your check to a cashier, and the check is processed through an electronic system that captures your bank account information and the amount of the check. In order for a merchant to debit your account, the merchant must first obtain your written authorization.

The merchant must provide you with a copy of the authorization. A common practice for obtaining your written authorization is to print a receipt similar to a credit card receipt and have you sign the top copy, while the bottom copy is returned to you. The receipt must contain the following information:

  • Name of the merchant.
  • Telephone number of the merchant or the third-party service provider.
  • Date of the transaction.
  • Amount of the transaction.
  • Serial number of the check.
  • Merchant number.
  • City and state where the transaction takes place.

Your complete account number and identification should not be printed on the receipt. If this information is included, for security reasons only a few digits should appear for you to recognize that it is your number. Finally, the merchant must void or mark your paper check, as it may not be used again, and return the original paper check to you.

Accounts Receivable (ARC).

Check conversion can also occur when you mail a check to pay for a purchase or to make a payment on an account. Such transactions are often referred to as Accounts Receivable (ARC) entries. These transactions occur when a merchant or business converts your check to an electronic debit when the check is received via the U.S. mail or at a drop box location.

The merchant or business is required to provide you with notice that your check will be converted into an electronic transaction. The notice must be provided before you mail your check or place it in a drop box. Additionally, the notice must state that the receipt of the consumer's check will be accepted as the authorization to debit the consumer's account using an ARC entry. Such notice can be included in a billing statement, collection letter, or other similar document. In addition, the merchant or business must afford you the right to opt out of having your check converted into an electronic transaction.

Once the check has been converted, the merchant or business must destroy your check within 14 days of the settlement date on the entry. So it's important to record each transaction.

Back Office Conversion (BOC).

BOC transactions occur when you provide your check at the point of sale and the merchant converts your check to an electronic transaction in the back office of the business, away from the retail operations. Similar to ARC, the merchant or business is required to provide you with notice that your check will be converted into an electronic transaction. This notice must be posted at the point of purchase or at the bill payment location. In addition, the business is required to provide a copy of this notice to you at the time of the transaction. Once the check has been converted, the merchant or business may either retain or destroy your paper check. Finally, the merchant or business must afford you the right to opt out of having your check converted into an electronic transaction.

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