Electronic Check Conversion

The next time you write a check to your local merchant, the cashier may hand it back 

to you after the payment has been processed 

– electronically. Or maybe you’re mailing a check as 

payment to a company. That payment, too, may be 

processed electronically. Why? More merchants and 

companies are using electronic check conversion, 

which converts information from your paper check 

into an electronic payment from your bank 

account. In fact, NACHA – the 

Electronic Payments Association 

– estimates that more than 1.7 

billion paper checks were converted 

through in-store and mail-in 

transactions in 2005.

How does electronic check conversion work?

When you give your check to a store cashier, the 

check is run through an electronic system that 

captures your bank account information and the 

amount of the check. You’re asked to sign a receipt 

and you get a copy for your records. When your 

check information has been processed and your 

check has been handed 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.

Electronic check conversion also may be used for 

checks you mail to pay for a purchase or to pay on 

an account. The merchant or company receiving 

your check electronically 

sends information from 

your check (but not the 

check itself) through the 

system, and the funds are 

transferred into their account.

How will I know if companies I do business 

with use electronic check conversion?

By law, you must receive notice if your check 

information will be processed electronically. Notice 

can be given in different ways: In a store, a merchant 

might post a sign at the register or give you a written 

notice. For a mailed check, the company might 

include the notice on your monthly statement or 

under its terms and conditions. The notice also 

should state if the merchant or company will 

electronically collect from your account a fee – like a 

“bounced check” fee – if you have insufficient funds 

to cover the transaction.

November 2006

FTC Facts

For Consumers Federal Trade Commission

For The Consumer

www.ftc.gov 1-877-ftc-help
Will I get my checks back?

Your financial institution may be unable to give you 

a duplicate copy of your checks, so it’s important 

to keep your checks – and receipts – when the 

payment has been processed electronically in a store, 

especially if you need proof of payment. In the case 

of merchants and companies that use electronic 

check conversion for your mailed checks, you won’t 

get your check back because the information was 

transmitted through the process only electronically. 

However, if you need a copy of the check, you 

can always ask the merchant or company if they’ll 

provide it to you. You could also consider using 

duplicate checks, where you 

keep a copy of every check you 

write. There may be an extra 

charge for duplicate checks, 

whether you buy them from 

your financial institution or a 

check printing company.

Will the payment be shown on my monthly 

bank statement?

Yes. Your bank statement must show the electronic 

transaction. It should include the name of the 

merchant or company, the payment amount, and 

the date the payment was electronically transferred 

from your account, and the transaction location. 

This information may be included in an area other 

than where your paper checks are listed, so carefully 

review the entire statement. It’s important to keep 

your bank statements; they can be used as proof of 

payment for your transactions.

What does electronic check conversion mean 

to me?

There may be no float on your check. That means, 

if you write a check today, you need to have funds 

in your account today to cover it. If you don’t, your 

check may bounce and you may be charged a fee by 

the merchant, your financial institution, or both. 

Bounced checks can blemish your credit record. If 

you’re concerned about bounced checks, you may 

want to consider overdraft protection or a backup 

line of credit on your account. Be aware, your 

financial institution may charge for these services.

What if I find an error on my account?

Promptly review your bank statement for errors. 

For example, did two payments go through instead 

of one? Were you charged the wrong amount for 

the item purchased? You 

have 60 days from the date 

your statement was sent to 

you to notify your financial 

institution of any errors. 

Your financial institution 

might take up to 45 days 

from the date you notify it 

to investigate the situation. In most instances, if it 

will take more than 10 business days, your financial 

institution must credit your account while it 

investigates the error.

What if I find unauthorized transactions on 

my account?

Generally, if you find unauthorized electronic 

check conversion on your account (or someone 

has fraudulently obtained your banking account 

information), notify your financial institution 

immediately. Your level of loss depends on how 

quickly you report the problem.

Under federal law, for unauthorized electronic 

check conversion, you have 60 days to report 

these transfers after your bank account statement 

Your bank statement 

must show the electronic 

transaction.

 FTC Facts For Consumers
containing the problem is mailed to you. If you fail 

to report the unauthorized transfers within this time 

period, you risk losing all the money in your account 

and the unused portion of your maximum line of 

credit for overdrafts. It’s also a good idea to report 

any other unauthorized transfers on your account or 

problems regarding any loss or theft of your checks 

immediately.

Contact your financial institution about any 

additional limits on liability they may offer.

Keeping Close Tabs on Your Account

The Federal Trade Commission suggests that you:

Keep track of deposits. Make sure you record all 

deposits to your checking account in your checkbook immediately. When you make deposits, 

save the receipts. They can 

help resolve mistakes. 

Remember to record all 

automatic or Electronic 

Fund Transfer (EFT) deposits, such as your paycheck, in your checkbook 

when they’re credited to 

your account. 

Keep track of withdrawals. Immediately 

record your transactions. This includes: checks 

you write and electronic check conversion; 

ATM withdrawals; debit card transactions; 

preauthorized withdrawals; online transfers you 

make; and fees or service charges, including 

ATM fees.

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Promptly balance your account when your 

statement arrives. This means reconciling 

the information you have recorded in your 

checkbook against the statement your financial 

institution sends to you. Review your entire 

bank statement; electronic check conversion may 

be recorded in an area other than where your 

paper checks are listed, such as under “other 

withdrawals.” 

Review your statement to be sure your checks 

were only processed once and for the correct 

amount. If your account won’t balance, and you 

can’t find the error, promptly call your financial 

institution for help. 

Be especially careful with telephone and online 

transactions. If a merchant or company lets you 

make a payment using check 

information for a phone 

or Web transaction, they 

should inform you that they 

will process your payment 

electronically. Your bank and 

checking account numbers 

will be requested as they 

appear at the bottom of your 

check, along with permission 

to charge the account for the item you’re paying 

for. Your transaction will then be processed and 

the funds withdrawn from your account and 

deposited in the merchant or company’s account 

electronically. 

Be especially cautious about sharing your bank 

and checking account numbers. Do not give 

out personal information – particularly on the 

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Review your entire bank 

statement; electronic check 

conversion may be recorded 

in an area other than where 

your paper checks are listed. 

FTC Facts For Consumers 
telephone, by e-mail or otherwise online – unless 

you have initiated the contact or know who 

you’re dealing with. Scam artists can use your 

personal information to commit fraud – such as 

identity theft. That’s where someone uses your 

personal information, such as your checking 

account number, Social Security number, 

mother’s maiden name, or birth date, without 

your knowledge or permission, to commit fraud 

or theft. 

For More Information

The FTC works for the consumer 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 to 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. The 

FTC enters Internet, telemarketing, identity theft, 

and other fraud-related complaints into Consumer 

Sentinel, a secure, online database available to 

hundreds of civil and criminal law enforcement 

agencies in the U.S. and abroad.

 FTC Facts For Consumers

For The Consumer Federal Trade Commission

www.ftc.gov 1-877-ftc-help

Federal Trade Commission

Bureau of Consumer Protection

Division of Consumer and Business Education