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Electronic Check Conversion

What is it and how does it work?

Electronic check conversion is a relatively new type of payment process. Your check is scanned for information - for the check number, your account number, and the financial institution's routing number - along with an image of the check itself on some occasions. This information is then used to make a one-time electronic transfer from your account. The transaction is approved or declined, just like the process for a credit card transaction. You then authorize the transaction by signing a receipt. Electronic check conversion converts a traditional paper check into an electronic item at the point-of-sale, and processes it through the Federal Reserve's Automated Clearing House (ACH) network. The check itself is not the method of payment. In many instances the clerk will return your voided or marked check to you along with your signed receipt.

Merchants are required by the Electronic Fund Transfer Act and the Federal Reserve Board's Regulation E to give notice that information from your check will be used to make an electronic payment from your account. Notice may be provided in different ways. For example, a merchant may post a sign at the register or may give you a written notice that you'll be asked to sign.

Consumers benefit from the use of electronic check conversion in a variety of ways:

  • Your privacy is protected due to the elimination of paper checks.
  • You immediately have a record of the transaction to reconcile with your statement.
  • Your retailer saves from 50 cents to $2.50 per check in processing costs, a savings that can be passed directly back to you, the consumer.
  • It eliminates the risk of NSF (non-sufficient funds) checks and fees, saving the retailer and the consumer valuable time and money.

Your electronic transaction is normally processed faster than a check. Be sure you have enough money in your account at the time you make the purchase.

It is very important to keep your voided checks, especially if you encounter a billing problem. Since your check is never processed by us in the traditional sense, we are unable to provide you with a duplicate copy.

Electronic check conversion can be used to make payments over the phone. Be cautious when sharing your account information over the phone. Don't provide any personal or financial information unless you initiate the call.

Note: Merchants, billers, and financial institutions now have the option of representing returned checks (NSF checks) electronically. This means that if you write a check that is processed in the traditional manner, and your check bounces, the merchant may represent the check electronically rather than re-deposit the check itself. You must be notified in advance (a sign at the merchant's place of business is considered "notification") for electronic check conversion or re-presentment to take place. As long as this notice is provided, the merchant can process your NSF check electronically. Represented checks are not subject to the Electronic Fund Transfer Act or the Federal Reserve Board's Regulation E.

Ask yourself....

  • Do I understand that the information from my check will be used to make an electronic payment from my account?
  • Do I have enough money in my account to cover the payment?
  • Did I receive a receipt?
  • Does the amount on the receipt match the amount of my purchase?
  • Was my check returned to me and voided?
  • Do the charges on my financial statement match my records?

Consumer Rights

You have different consumer rights with an electronic check conversion transaction than when you use your check as payment. For example, with electronic check conversion, you have the right to an investigation by your financial institution when an error occurs.

What are my rights in electronic check conversion transactions?

  1. You have the right to receive notice when you provide your check advising you that information from the check will be used to make an electronic payment from your account.
  2. When you provide your check, you have the right to a notice advising you of any fee that the merchant will collect from your account electronically if you do not have enough money in your account to cover the transaction. This fee is similar to a "bounced check" fee.
  3. You have the right to receive a receipt when you make a purchase at a store. The receipt will contain information about the transaction, including:
    • Date
    • Amount
    • Location
    • Name of merchant
  4. You have the right to have this same information included as part of the regular account statement from your financial institution.
  5. You have the right to ask your financial institution to investigate any electronic fund transfers from your account that you believe are unauthorized or incorrect.


Q. How is check conversion different from a debit (check card) transaction?
A. Debit transactions are processed through ATM networks, where a card number is required to link to the correct credit union or bank for payment. Check conversion employs existing infrastructure using MICR (magnetic ink computer readable) data from the check and running it through the ACH network.

Q. What is the difference between ATM cards and debit (check) cards?
A. The primary difference is the network used to clear your funds. ATM cards use ATM networks and require a card number to link to the correct financial institution for payment. Groups of banks sometimes share ATM networks located throughout a region of the country. Debit (check) cards use the ACH (Automated Clearing House) network, which acts as the central clearing facility for all Electronic Fund Transfer transactions that occur nationwide. The Federal Reserve Banks operate an automated clearinghouse, as do some private-sector firms.

Q. Are funds debited instantly from my checking account?
A. No. Unlike debit cards, funds are moved within 48 hours of the purchase.

Q. What should I do if I have a problem with an electronic check conversion transaction?
A. Always review your account statement. You should immediately contact us if you see a problem. You have 60 days from the date your statement was sent to tell us about the problem. It may take up to 45 days from the time you notify us to complete an investigation.

Q. May the same check be used more than once?
A. No. An electronic check conversion transaction is a one-time electronic payment from your account. Your check number is used to identify the transaction.

Q. Can electronic check conversion occur if I mail a check to pay a bill?
A. Yes, as long as you are notified by the merchant. For example, each time you receive your insurance bill there is a notice that tells you that when you mail a check, information from that check will be used to make an electronic payment from your account. If you then send a check, you have agreed to electronic check conversion. Your check will not be returned to you because the transaction was processed as an electronic fund transfer, not as a check transaction.

Be sure you have enough money in your account when you mail your check, keep records of your payments, and check your account statements to make sure the amounts charged are correct.

Q. What if I don't want my check to be used for electronic check conversion?
A. If you don't want your check to be used for electronic check conversion, you may have to provide another form of payment (for example, cash, check card, or credit card).

Q. Can a merchant charge me a collection fee, charging my account for both a represented (bounced) check fee and the electronic fee?
A. No. No collection fee can be charged to your account without your written authorization.

Q. What happens to my check after it has been collected electronically?
A. If the merchant does not return your voided or marked check to you, it should be kept by the merchant for 90 days. In addition, the merchant is required to keep a copy for seven years.

Q. What happens if a merchant represents a check electronically, and I have already paid the amount for the check?
A. Contact us within 60 days and we will investigate. If we discover that your account has been charged twice in error, your account will be credited.

Q. Can I get my check back?
A. Yes. You will need to contact the merchant directly.

Q. How will a represented check appear on my statement?
A. It will be listed as an electronic transaction and the description will read "REDEPCHECK". You will also see the check amount and its check number.

Q. What if I did not receive notice of the electronic re-presentment process?
A. You may sign an affidavit with us that you did not receive notice. Your account will be provisionally credited for the unauthorized debit and an investigation will take place.

Q. Where can I file a complaint?
A. The Federal Trade Commission works on behalf of the consumer to prevent fraudulent, deceptive, and unfair business practices. Contact them in writing at:

Federal Trade Commission
Consumer Response Center
600 Pennsylvania Ave., NW
Washington, DC 20580

or call 877-FTC-HELP - toll free (877) 382-4357 or visit their web site. Send a copy of your complaint to:

Board of Governors of the Federal Reserve System
Division of Consumer and Community Affairs
Washington, DC 20551
(202) 452-3693

or visit their web site.

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