Monday, December 17, 2007

Finance fitness

Echecks as Compared with Other Forms of Payments Elizabeth Murrow

There are many forms of payment out there that one can use. Most businesses provide all forms of payment options to help attract more customers and for added increase in sales. You can choose from debit cards, credit cards, paper checks, echecks, ACH, Secure Electronic Transaction (SET) or even home banking. Despite the number of payment options out there, not all will be appealing to everyone. Some may prefer the use of debit cards over credit cards, or in some cases, echecks over paper checks. All forms of payment options are as good as the others but a comparison among them can help you decide which one is applicable for you and your needs.

People who are short in cash prefer the use of credit cards. This gives them the option of having cash available whenever they need it. An issuer lends money to the consumer to be paid to the merchant. Credit cardholders are able to revolve their balance at the cost of having interest charged. The use of credit cards also promises secure transactions. However, if you are always short of cash, make sure that you will also be able to pay for the purchases you make using your credit card as you wouldn't want your debt to pile up.

Debit cards, on the other hand, is an alternative method to cash when making purchases. Funds are directly withdrawn or collected from the cardholder's bank account using a PIN. This type of payment method is most commonly used in point-of-sale retail outlets like department stores, groceries and malls. You can also use debit cards to be able to make payments and purchases via phone or online. However, there is a set limit on the amount of money that can be withdrawn or the amount of money that is charged using a debit card. Aside from credit cards and debit cards, another form of payment option that is also widely used is the paper check.

A paper check is a written document directing a bank to pay money. Some banks offer debit cards and checking accounts in one combination. Although paper checks are widely used, some people find it impractical because of the costs involved in processing paper checks. Costs in processing paper checks fall into three categories namely supplies, handling and uncollected checks. Some surveys say that estimates for a lifetime cost of a paper check cycle ranges between $.75 to $3.00 per check. Likewise, paper checks are said to be forgiving of errors. Despite the errors that one can do when processing them, the chances of it getting processed, cleared and settled is still high. Businesses who use paper checks are also able to establish their own criteria in using them. Such criteria may include the need to require identification, use verification or guarantee services and even ship before or after payment.

Another form of payment option is the Automated Clearing House or the ACH. ACH was said to be developed to replace paper checks. When we say ACH, it refers to the name of an electronic network for financial transactions established in the United States. It processes large volumes of both credit and debit card transactions. ACH created a new form of system that includes its own terminology. A new set of business practices and rules were developed to manage transactions made through ACH. The ACH payment system can be used for a variety of options such as payroll deposits, government benefits and tax refunds, local tax payments, e-commerce payments and the like. Today, people are only beginning to get used to the whole ACH system.

Secure Electronic Transactions or SET are defined as a set of protocols used to facilitate credit card transactions over networks such as the Internet. Actually, it is not a payment system, rather, it is a set of security protocols that enable a user to utilize existing credit card payment system on an open network securely. The main purpose of SET is to enable a cardholder to pay for any purchase made from an Internet-based merchant more secure than using a point-of-sale transaction. It involves the cardholder, internet merchant and a payment gateway to facilitate the purchase.

Compared to the payment options mentioned above, home banking hasn't been all that successful. Although businesses offer this option, they are not the ones who directly handle the transactions. They outsource the transactions to notable providers such as Checkfree. Home banking works this way: the consumer gives a payment instruction to a financial institution. The payment instruction is then converted into two transactions namely, removal of funds from the cardholder's account and the payment to the payee.

Last but not the least are the use of electronic checks. More and more businesses nowadays provide echeck transactions. Echecks can be used for almost anything including point-of-sale payments and online business payments. Echecks are also not subject to restrictions as with the use of a credit or debit card. You can also be sure that every transaction you make using an echeck is processed fast and secure. Aside from being able to use it to make payments, echecks can also be used to receive payments. Echecks are also more convenient and low-cost than paper checks. Echecks are simply an online version of the paper check. Everything that you see on a paper check can be seen in an electronic check. Because of this, there is no need for new terminologies. If you have been using paper checks, using electronic checks will never be a problem. Moreover, the use of echecks can sometimes be directly exchanged between parties, eliminating the need for an intermediary. It can also carry substantial information relating directly to the payment. Now that you know the differences between each type of payment option, all you need to do now is analyze each system and choose which one matches your needs and expectations.

======== Elizabeth Murrow currently works for a payment processing solution company. Being in the business for quite a long time now, she has been continuously sharing her knowledge through various lectures and blogging, including and

There is another option and that is a secured debit card- The one world united master card has the benifits of a charge card but you set the limit of spending, it is a debit card but with more control and safety and seurity. More information is availabe for this safe option.

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