What is Electronic Check Conversion?
A recreation of an original article by SUSAN TOMPOR
FREE PRESS COLUMNIST
My neighbor picked up his 6-year-old son from school the other day and drove to a local retail store to pick up some essentials for Halloween. They grabbed a few of life's staples: some Legos, a pack of 3x5 cards to create early reading word cards and two bags of Snickers, glow-in-the-dark, Halloween fun bars we all knew would never get near any trick-or-treaters.
Then he hit the checkout and pulled out his checkbook. What happened next was an example of 21st Century check acceptance. He didn't have to date the check, fill in the amount or even sign it. He simply handed a blank check to the lady at the register.
She put the check through a machine, pushed a couple of buttons and then handed the check back to him. A credit card looking receipt printed out and my neighbor signed it.
What we just experienced is an up-and-coming process called electronic check conversion, which allows retailers and others to transform regular paper checks into electronic checks. The numbers on the bottom of each check are picked up by a scanning device and processed in much the same manner as a credit card is.
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Electronically converted check purchases will show up on your statement as an electronic debit. The statement is legal proof you paid the bill and will show the amount and store name of where the purchase was made.
Advantages for Retail Businesses
Converting checks to an electronic format allows businesses to realize the cost savings produced by eliminating the handling and processing of paper checks. Since you are no longer required to physically deposit checks at a bank branch, many retailers are using check conversion to simplify cash management and consolidate bank accounts.
Check conversion will reduce fraud risk too as checks are electronically verified against a database of closed accounts or accounts with bad-risk histories at the time the transaction takes place.
Check conversion doesn't necessarily eliminate Non-Sufficient checks. Because the item was processed electronically, failed items return in 48 hours instead of 5 to 7 days. This allows for a faster entry into the negative file and reduces the number of repeat checks that a merchant might accept.
Because the checks were verified during the conversion process, most electronic checks that are returned are attributed to a simple banking oversight, and are therefore easily collected. And because the transactions are processed electronically, gone also is the return item fee that your bank charges when a check is returned, usually around $5.00 per returned check.
Because of the numerous benefits and bottom line cost savings, stores like Wal-Mart, Marshall Fields, Capital One, Shoe Station and the Gap have already started using electronic check conversion.
Summary
Electronic checks will:
- Speed up payment and reduce processing costs
- Reduce fraud risk
- Verify your customer's account status before accepting the check
- Reduce handling and deposit costs
- Eliminate bank fees associated with returned checks