5.6: Electronic Banking

For many consumers electronic banking means 24-hour access to cash through an automated teller machine (ATM) or Direct Deposit of pay cheques into cheque or savings accounts. But electronic banking now involves many different types of transactions.

Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic technology as a substitute for cheques and other paper transactions. EFT is initiated through devices like cards or codes that let you or those you authorise, access your account. Many financial institutions use ATM or debit cards and personal identification numbers (PIN) for this purpose. Some use other forms of debit cards such as those that require, at the most, your signature or a scan.

Electronic Fund Transfers (EFT)

EFT offers several services that consumers may find practical:

• Automated Teller Machines or 24-hour Tellers are electronic terminals that let you bank almost any time. To withdraw cash, make deposits, or transfer funds between accounts, you generally insert an ATM card and enter your PIN. Some financial institutions and ATM owners charge a fee, particularly to consumers who don’t have accounts with them or on transactions at remote locations. Generally, ATMs must tell you they charge a fee and its amount on or at the terminal screen before you complete the transaction. Check the rules of your institution and ATMs you use to find out when or whether a fee is charged.
• Direct Deposit lets you authorise specific deposits such as pay cheques and pension cheques, to your account on a regular basis. You also may pre-authorise direct withdrawals so that recurring accounts such as insurance premiums, mortgages, and utility bills, are paid automatically.
• Pay-by-Phone Systems let you call your financial institution with instructions to pay certain accounts or to transfer funds between accounts. You must have an agreement with the institution to make such transfers.
• Personal Computer Banking lets you handle many banking transactions via your personal computer. For instance, you may use your computer to view your account balance, request transfers between accounts, and pay bills electronically.
• Point-of-Sale Transfers let you pay for purchases with a debit card, which also may be your ATM card. The process is similar to using a credit card with some important exceptions. While the process is fast and easy, a debit card purchase transfers money fairly quickly from your bank account to the store’s account. So it’s important that you have funds in your account to cover your purchase. This means you need to keep accurate records of the dates and amounts of your debit card purchases and ATM withdrawals in addition to any cheques you write. Your liability for unauthorised use and your rights for error resolution may differ with a debit card.
• Electronic Cheque Conversion converts a paper cheque into an electronic payment at the point of sale or elsewhere, such as when a company receives your cheque in the mail. In a store, when you give your cheque to a store cashier, the cheque is processed through an electronic system that captures your banking information and the amount of the cheque. Once the cheque is processed, you’re asked to sign a receipt authorising the merchant to present the cheque to your bank electronically and deposit the funds into the merchant’s account. You get a receipt of the electronic transaction for your records. When your cheque has been processed and returned to you by the merchant, it should be voided or marked by the merchant so that it can’t be used again. In the mail-in situation, you should still receive advance notice from a company that expects to process your cheque electronically.

Be especially careful in telephone transactions, which also could involve e-cheques. A legitimate merchant should explain the process and answer any questions you may have. The merchant also should ask for your permission to debit your account for the item you’re purchasing or paying on. However, because telephone e-cheques don’t occur face-to-face, you should be cautious with whom you reveal your bank or cheque account information. Don’t give this information to sellers with whom you have no prior experience or with whom you have not initiated the call, or to sellers who seem reluctant to discuss the process with you.

Not all electronic fund transfers are covered by the EFT Act. For example, some financial institutions and merchants issue cards with cash value stored electronically on the card itself. Examples include prepaid telephone cards, mass transit passes, and some gift cards. These “stored-value” cards, as well as transactions using them, may not be covered by the EFT Act. This means you may not be covered for the loss or misuse of the card. Ask your financial institution or merchant about any protections offered for these cards.