Federal Trade Commission | ftc.gov

Electronic 

Banking

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For many people, electronic banking means 24-hour access to cash through an automated teller machine 

(ATM) or Direct Deposit of paychecks into checking or 

savings accounts. But electronic banking involves many 

different types of transactions, rights, responsibilities — 

and sometimes, fees. Do your research. You may find 

some electronic banking services more practical for your 

lifestyle than others.

Electronic Fund Transfers

Electronic banking, also known as electronic fund 

transfer (EFT), uses computer and electronic technology 

in place of checks and other paper transactions. EFTs 

are initiated through devices like cards or codes that let 

you, or those you authorize, access your account. Many 

financial institutions use ATM or debit cards and Personal 

Identification Numbers (PINs) for this purpose. Some 

use other types of debit cards that require your signature 

or a scan. For example, some use radio frequency 

identification (RFID) or other forms of “contactless” 

technology that scan your information without direct 

contact with you. The federal Electronic Fund Transfer 

Act (EFT Act) covers some electronic consumer 

transactions.

Here are some common EFT services:

ATMs are electronic terminals that let you bank almost 

virtually 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 if you don’t 

have accounts with them or if your transactions take place 
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at remote locations. Generally, ATMs must tell you they 

charge a fee and the amount on or at the terminal screen 

before you complete the transaction. Check with your 

institution and at ATMs you use for more information 

about these fees.

Direct Deposit lets you authorize specific deposits — like 

paychecks, Social Security checks, and other benefits — 

to your account on a regular basis. You also may preauthorize direct withdrawals so that recurring bills — like 

insurance premiums, mortgages, utility bills, and gym 

memberships — are paid automatically. Be cautious before 

you pre-authorize recurring withdrawals to pay companies 

you aren’t familiar with; funds from your bank account 

could be withdrawn improperly. Monitor your bank 

account to make sure direct recurring payments take place 

and are for the right amount.

Pay-by-Phone Systems let you call your financial 

institution with instructions to pay certain bills or to 

transfer funds between accounts. You must have an 

agreement with your institution to make these transfers.

Personal Computer Banking lets you handle many 

banking transactions using your personal computer. For 

example, you may use your computer to request transfers 

between accounts and pay bills electronically.

Debit Card Purchase or Payment Transactions let you 

make purchases or payments with a debit card, which 

also may be your ATM card. Transactions can take place 

in-person, online, or by phone. The process is similar to 

using a credit card, with some important exceptions: a 

debit card purchase or payment transfers money quickly 

from your bank account to the company’s account, so you 
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have to have sufficient 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, payments, and ATM withdrawals. Be sure 

you know the store or business before you provide your 

debit card information to avoid the possible loss of funds 

through fraud. Your liability for unauthorized use, and 

your rights for dealing with errors, may be different for a 

debit card than a credit card.

Electronic Check Conversion converts a paper check into 

an electronic payment in a store or when a company gets 

your check in the mail.

When you give your check to a cashier in a store, the 

check is run through an electronic system that captures 

your banking information and the amount of the check. 

You sign a receipt and you get a copy for your records. 

When your check is given back to you, it should be 

voided or marked by the merchant so that it can’t be used 

again. The merchant electronically sends information from 

the check (but not the check itself) to your bank or other 

financial institution, and the funds are transferred into the 

merchant’s account.

When you mail a check for payment to a merchant or 

other company, they may electronically send information 

from your check (but not the check itself) through the 

system; the funds are transferred from your account 

into their account. For a mailed check, you still should 

get notice from a company that expects to send your 

check information through the system electronically. 

For example, the company might include the notice on 

your monthly statement. The notice also should state if 

the company will electronically collect a fee from your 
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account — like a “bounced check” fee — if you don’t 

have enough money to cover the transaction.

Be careful with online and telephone transactions that may 

involve the use of your bank account information, rather 

than a check. A legitimate merchant that lets you use your 

bank account information to make a purchase or pay on an 

account should post information about the process on its 

website or explain the process on the phone. The merchant 

also should ask for your permission to electronically 

debit your bank account for the item you’re buying 

or paying on. However, because online and telephone 

electronic debits don’t occur face-to-face, be cautious 

about sharing your bank account information. Don’t give 

out this information when you have no experience with 

the business, when you didn’t initiate the call, or when the 

business seems reluctant to discuss the process with you. 

Check your bank account regularly to be sure that the 

right amounts were transferred.

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 phone cards, 

mass transit passes, general purpose reloadable cards, and 

some gift cards. These “stored-value” cards, as well as 

transactions using them, may not be covered by the EFT 

Act, or they may be subject to different rules under 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.

For details, see Gift Cards at consumer.ftc.gov.
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Disclosures

To understand your rights and responsibilities for your 

EFTs, read the documents you get from the financial 

institution that issued your “access device” – the card, 

code or other way you access your account to transfer 

money electronically. Although the method varies by 

institution, it often involves a card and/or a PIN. No 

one should know your PIN but you and select employees 

at your financial institution. You also should read the 

documents you receive for your bank account, which may 

contain more information about EFTs.

Before you contract for EFT services or make your first 

electronic transfer, the institution must give you the 

following information in a format you can keep.

► a summary of your liability for unauthorized 

transfers 

► the phone number and address for a contact if you 

think an unauthorized transfer has been or may be 

made, the institution’s “business days” (when the 

institution is open to the public for normal business), 

and the number of days you have to report suspected 

unauthorized transfers 

► the type of transfers you can make, fees for 

transfers, and any limits on the frequency and dollar 

amount of transfers 

► a summary of your right to get documentation of 

transfers and to stop payment on a pre-authorized 

transfer, and how you stop payment 

► a notice describing how to report an error on a 

receipt for an EFT or your statement, to request 
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more information about a transfer listed on your 

statement, and how long you have to make your 

report 

► a summary of the institution’s liability to you if it 

fails to make or stop certain transactions 

► circumstances when the institution will share 

information about your account with third parties 

► a notice that you may have to pay a fee charged 

by operators of ATMs where you don’t have an 

account, for an EFT or a balance inquiry at the 

ATM, and charged by networks to complete the 

transfer. 

You also will get two more types of information for most 

transactions: terminal receipts and periodic statements. 

Separate rules apply to deposit accounts from which 

pre-authorized transfers are drawn. For example, preauthorized transfers from your account need your written 

or similar authorization, and a copy of that authorization 

must be given to you. Additional information about 

pre-authorized transfers is in your contract with the 

financial institution for that account. You’re entitled to 

a terminal receipt each time you initiate an electronic 

transfer, whether you use an ATM or make a point-of-sale 

electronic transfer, for transfers over $15. The receipt 

must show the amount and date of the transfer, and its 

type, like “from savings to checking.” It also must show 

a number or code that identifies the account, and list the 

terminal location and other information. When you make 

a point-of-sale transfer, you’ll probably get your terminal 

receipt from the salesperson.

You won’t get a terminal receipt for regularly occurring 

electronic payments that you’ve pre-authorized, like 
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insurance premiums, mortgages, or utility bills. Instead, 

these transfers will appear on your statement. If the preauthorized payments vary, however, you should get a 

notice of the amount that will be debited at least 10 days 

before the debit takes place.

You’re also entitled to a periodic statement for each 

statement cycle in which an electronic transfer is made. 

The statement must show the amount of any transfer, the 

date it was credited or debited to your account, the type 

of transfer and type of account(s) to or from which funds 

were transferred, the account number, the amount of any 

fees charged, the account balances at the beginning and 

end of the statement cycle, and the address and phone 

number for inquiries. You’re entitled to a quarterly 

statement whether or not electronic transfers were made.

Keep and compare your EFT receipts with your periodic 

statements the same way you compare your credit card 

receipts with your monthly credit card statement. This will 

help you make the best use of your rights under federal 

law to dispute errors and avoid liability for unauthorized 

transfers.

Errors

You have 60 days from the date a periodic statement 

containing a problem or error was sent to you to notify 

your financial institution. The best way to protect yourself 

if an error occurs is to notify the financial institution by 

certified letter. Ask for a return receipt so you can prove 

that the institution got your letter. Keep a copy of the 

letter for your records.
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Under federal law, the institution has no obligation 

to conduct an investigation if you miss the 60-day 

deadline.

Once you’ve notified the financial institution about 

an error on your statement, it has 10 business days to 

investigate. The institution must tell you the results of its 

investigation within three business days after completing 

it, and must correct an error within one business day after 

determining that the error has occurred. An institution 

usually is permitted to take more time — up to 45 days 

— to complete the investigation, but only if the money 

in dispute is returned to your account and you’re notified 

promptly of the credit. At the end of the investigation, 

if no error has been found, the institution may take the 

money back if it sends you a written explanation.

An error also may occur in connection with a pointof-sale purchase with a debit card. For example, an oil 

company might give you a debit card that lets you pay 

for gas directly from your bank account. Or you may 

have a debit card that can be used for a various types of 

retail purchases. These purchases will appear on your 

bank statement. In case of an error on your account, 

however, you should contact the card issuer (for example, 

the oil company or bank) at the address or phone number 

provided by the company for errors. Once you’ve notified 

the company about the error, it has 10 business days to 

investigate and tell you the results. In this situation, it 

may take up to 90 days to complete an investigation, if the 

money in dispute is returned to your account and you’re 

notified promptly of the credit. If no error is found at the 

end of the investigation, the institution may take back the 

money if it sends you a written explanation.
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Lost or Stolen ATM or Debit Cards

If your credit card is lost or stolen, you can’t lose more 

than $50. If someone uses your ATM or debit card 

without your permission, you can lose much more.

If you report an ATM or debit card missing to the 

institution that issues the card before someone uses the 

card without your permission, you can’t be responsible 

for any unauthorized withdrawals. But if unauthorized 

use occurs before you report it, the amount you can be 

responsible for depends on how quickly you report the 

loss to the card issuer.

► If you report the loss within two business days after 

you realize your card is missing, you won’t be 

responsible for more than $50 of unauthorized use. 

► If you report the loss within 60 days after your 

statement is mailed to you, you could lose as much 

as $500 because of an unauthorized transfer. 

► If you don’t report an unauthorized use of your 

card within 60 days after the card issuer mails 

your statement to you, you risk unlimited loss; you 

could lose all the money in that account, the unused 

portion of your maximum line of credit established 

for overdrafts, and maybe more. 

If an extenuating circumstance, like lengthy travel or 

illness, keeps you from notifying the card issuer within the 

time allowed, the notification period must be extended. 

In addition, if state law or your contract imposes lower 

liability limits than the federal EFT Act, the lower limits 

apply.
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Once you report the loss or theft of your ATM or 

debit card to the card issuer, you’re not responsible 

for additional unauthorized use. Because unauthorized 

transfers may appear on your statements, though, read 

each statement you receive after you’ve reported the loss 

or theft. If the statement shows transfers that you didn’t 

make or that you need more information about, contact the 

card issuer immediately, using the special procedures it 

provided for reporting errors.

For more information, see Lost or Stolen Credit, ATM, 

and Debit Cards at consumer.ftc.gov.

Overdrafts for One-Time Debit Card 

Transactions and ATM Cards

If you make a one-time purchase or payment with your 

debit card or use your ATM card and don’t have sufficient 

funds, an overdraft can occur. Your bank must get your 

permission to charge you a fee to pay for your overdraft 

on a one-time debit card transaction or ATM transaction. 

They also must send you a notice and get your opt-in 

agreement before charging you.

For accounts that you already have, unless you opt-in, 

the transaction will be declined if you don’t have the 

funds to pay it, and you can’t be charged an overdraft 

fee. If you open a new account, the bank can’t charge you 

an overdraft fee for your one-time debit card or ATM 

transactions, either, unless you opt-in to the fees. The 

bank will give you a notice about opting-in when you open 

the account, and you can decide whether to opt-in. If you 

opt-in, you can cancel any time; if you don’t opt-in, you 

can do it later.
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These rules do not apply to recurring payments from your 

account. For those transactions, your bank can enroll you 

in their usual overdraft coverage. If you don’t want the 

coverage (and the fees), contact your bank to see if they 

will let you discontinue it for those payments.

Limited Stop-Payment Privileges

When you use an electronic fund transfer, the EFT Act 

does not give you the right to stop payment. If your 

purchase is defective or your order isn’t delivered, it’s 

as if you paid cash: It’s up to you to resolve the problem 

with the seller and get your money back.

One exception: If you arranged for recurring payments out 

of your account to third parties, like insurance companies 

or utilities, you can stop payment if you notify your 

institution at least three business days before the scheduled 

transfer. The notice may be written or oral, but the 

institution may require a written follow-up within 14 days 

of your oral notice. If you don’t follow-up in writing, the 

institution’s responsibility to stop payment ends.

Although federal law provides limited rights to stop 

payment, financial institutions may offer more rights or 

state laws may require them. If this feature is important to 

you, shop around to be sure you’re getting the best “stoppayment” terms available.
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Additional Rights

The EFT Act protects your right of choice in two 

specific situations: First, financial institutions can’t 

require you to repay a loan by preauthorized electronic 

transfers. Second, if you’re required to get your salary 

or government benefit check by EFT, you can choose the 

institution where those payments will be deposited.

For More Information and Complaints

If you decide to use EFT, keep these tips in mind:

► Take care of your ATM or debit card. Know where 

it is at all times; if you lose it, report it as soon as 

possible. 

► Choose a PIN for your ATM or debit card that’s 

different from your address, telephone number, 

Social Security number, or birthdate. This will make 

it more difficult for a thief to use your card. 

► Keep and compare your receipts for all types of EFT 

transactions with your statements so you can find 

errors or unauthorized transfers and report them. 

► Make sure you know and trust a merchant or 

other company before you share any bank account 

information or pre-authorize debits to your account. 

Be aware that some merchants or companies may 

process your check information electronically when 

you pay by check. 

► Read your monthly statements promptly and 

carefully. Contact your bank or other financial 
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institution immediately if you find unauthorized 

transactions and errors. 

If you think a financial institution or company hasn’t 

met its responsibilities to you under the EFT Act, 

you can complain to the appropriate federal agency. 

Visit the Consumer Financial Protection Bureau 

(consumerfinance.gov) or HelpWithMyBank.gov, a 

site maintained by the Office of the Comptroller of the 

Currency, for answers to frequently-asked questions on 

topics like bank accounts, deposit insurance, credit cards, 

consumer loans, insurance, mortgages, identity theft, and 

safe deposit boxes, and for other information about federal 

agencies that have responsibility for financial institutions.

The FTC works to prevent fraudulent, deceptive and 

unfair business practices in the marketplace and to provide 

information to help consumers spot, stop and avoid them. 

To file a complaint or get free information on consumer 

issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP 

(1-877-382-4357); TTY: 1-866-653-4261. 

Watch the video, How to File a Complaint, at 

consumer.ftc.gov/media to learn more. The FTC 

enters consumer complaints into the Consumer Sentinel 

Network, a secure online database and investigative tool 

used by hundreds of civil and criminal law enforcement 

agencies in the U.S. and abroad.
Federal Trade Commission

ftc.gov

August 2012