is a transaction that takes place over a computerized network, either among accounts at the same bank or to different accounts at separate financial institutions.

EFTs include direct-debit transactions, wire transfers, direct deposits, ATM withdrawals and online bill pay services. Transactions are processed through the Automated Clearing House (ACH) network, the secure transfer system of the Federal Reserve that connects all U.S. banks,creditunions and other financial institutions.

For example, when you use yourdebitcard to make a purchase at a store or online, the transaction is processed using an EFT system. The transaction is very similar to an ATM withdrawal, with near-instantaneous payment to the merchant anddeductionfrom your checking account.

Direct depositis another form of an electronicfundstransfer. In this case, funds from your employers bank account are transferred electronically to your bank account, with no need for paper-based payment systems.

The increased use of EFTs for online bill payments, purchases and pay processes is leading to a paper-free banking system, where a large number of invoices and payments take place over digital networks. EFT systems play a large role in this future, with fast, secure transactions guaranteeing a seamless transfer offundswithin institutions or across banking networks.

EFT transactions, also known as anonline transactionorPIN-debit transaction, alsoofferan alternative to signaturedebittransactions, which take place through one of the majorcredit cardprocessing systems, such as Visa, MasterCard or Discover, and can cost as much as 3% of the total purchase price. EFT processing, on the other hand, only charges an average of 1% for debit card transactions.

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