A person sitting at a table with a laptop computer and a payment card.
Running a business

Electronic funds transfer (EFT) payments vs. Automated Clearing House (ACH) payments: What's the difference?

When it comes to transferring funds, there are many options available, each with its pros and cons. If you run a small business, you should learn about electronic funds transfers (EFTs) and Automated Clearing House (ACH) payments, as these are payment tools that could help your business.

Read on to learn the difference between the two, which you should use and when.

ACH vs EFT: What's the difference?

Even though both EFTs and ACH payments are ways to transfer money, they aren't interchangeable. Every Automated Clearing House payment is a type of electronic funds transfer, but not all EFTs are ACH payments. In other words, an ACH payment is a kind of EFT.

  • While both payment methods transfer funds automatically from your bank account, they use different ways to do so. If you have customers from out of the country, you'll likely want to accept ACH payments. However, if you're only conducting business inside Canada, accepting EFT payments should be sufficient.

What is EFT?

EFT refers to electronic funds transfer and this is a digital transaction where funds are deducted from one account and sent to another account. EFT payments can be used in many situations, like paying suppliers, billing customers, and direct deposit payroll. You can use this payment method for one-time charges or to deduct recurring charges like monthly membership dues.

An EFT is simply a payment sent electronically, without the exchange of cash or cheques. ATM transactions, wire transfers, and debit card transactions are all EFTs, as are ACH payments.

What is an Automated Clearing House payment?

An ACH payment is a type of EFT that transfers money between financial institutions using the Automated Clearing House network. This type of payment is much more commonly used in the United States than in Canada, but for Canadian businesses with an American customer base, it may be worth having on offer. Note that an ACH payment is sometimes referred to as an automated funds transfer (AFT) in Canada.

Unlike with an EFT, if a customer wants to use an ACH payment, they need to know their transit number and account number — so it's often more convenient to use another payment method for single purchases. However, ACH transfers can be useful for automatic payments for customers who are making large purchases, and for paying suppliers.

It can be a good idea to make ACH transfers available as part of your online invoicing process so that customers without debit or credit cards can make purchases online.

Why should I use EFTs?

Electronic funds transfers have many benefits, both for businesses and consumers.

  • Convenience and speed: You can use EFTs for a wide variety of tasks without having to write cheques or use cash, and the money is moved much faster than if you were to use manual transfer solutions. When you schedule recurring transactions, you save even more time. Plus, there are no limits on the amount of money you can transfer in a transaction, unlike with Interac e-Transfers, which have daily maximums.
  • Affordability: Although cost varies for different types of EFTs, it is generally an economical choice to transfer funds digitally. For example, QuickBooks Payments offers a fee of 1% which is still relatively affordable.
  • Tracking: Using EFTs to send and receive payments simplifies your bookkeeping and ensures there's a record of all activity.
  • Security: EFTs are encrypted for security, and many electronic funds transfers use chips or contactless payment protocols that send codes rather than card numbers.

Having the ability to pay and get paid in a convenient, affordable, and secure way just makes good business sense.

Are EFTs safe?

Electronic funds transfers are generally safe. They are encrypted and sent over secure networks, thus minimizing security concerns.

How long does it take for an EFT to clear?

Electronic funds transfers can take up to four days to complete, depending on the method you use. Credit card payments process almost immediately while wire transfers can take from a few hours to two days.

Can I use EFTs for international payments?

You can use EFTs for international payments. The fees and timelines will vary depending on the method you use. Read the steps to setting up international payments in QuickBooks.

Your business can stay competitive by offering customers various payment options, no matter where they are. Get a head start when you accept payments through QuickBooks.

Related Articles

Looking for something else?

Get QuickBooks

Smart features made for your business. We've got you covered.

Firm of the Future

Expert advice and resources for today’s accounting professionals.

QuickBooks Support

Get help with QuickBooks. Find articles, video tutorials, and more.