How to Cash Electronic Checks

Electronic checks, or e-checks, are among the fastest growing form of payment methods. According to the Electronic Payments Association (NACHA), a nonprofit organization that oversees the Automated Clearing House (ACH) network, “ARC check conversion volume grew by more than 600 million payments to 3.5 billion and accounted for 33 percent of financial institutions' ACH transaction growth in 2007” (see References 1). Check conversion is simple, safe, and efficient, and provides for faster processing, fewer returned checks and earlier fraud protection.

Back Office Conversion

Back Office Conversion allows a business to accept a paper check for payment and convert it electronically at a central location. At this point in the process, the only difference is that customers must receive notification their checks will be converted and must be given the choice to opt-out. If a customer chooses to opt out, you are under no obligation to accept his check.

The transaction takes place via a one-time Automated Clearing House (ACH) debit. Using payment information from the check, your check processing service creates an ACH file and transmits it to the customer’s bank via the ACH network. The customer’s account receives a debit for the amount and you receive a credit.

After sending payment information to the check processing service, you would make and retain a copy of the check and destroy the original.

Once the transaction is complete, you will immediately see the transaction listed in your bank account as a normal deposit.

Point-of-Purchase Conversion

Point of Purchase conversion occurs at the business location. The customer writes a check and receives the check back when the process is complete. Although you do not retain possession of the check, the customer signs, either electronically or on paper, a receipt assuming responsibility for the check.

As the check passes through a scanner, information from the customer's check transfers to the check processing service. The payment information obtained allows for the creation of an ACH file. The check processing service transmits the file to the customer’s bank via the ACH network, where the customer’s account receives a debit for the amount and you receive a credit.

Once the transaction is complete, you will see the transaction listed in your bank account as a normal deposit. Converted checks will normally clear the customer’s bank within one day of receipt.


  • Do your homework before choosing a check processing service. Fees and services vary widely and deserve careful consideration. Transferring funds electronically demands a high levels of security. Make sure the electronic check processing system you use has well-established security and encryption tools in place.


  • Federal law required that you notify customers if you intend to use e-checks. Notification can occur by including the notice in a billing statement or by posting the notice in a conspicuous place, usually near a cash register. You must also provide customers with a copy of the notice for their personal records. Back office conversions require you to retain a copy of the check for a period of two years.



About the Author

Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.