What is an EFT, and what are two common forms?

• A. Electronic funds transfer moves money electronically between banks; common forms include ACH transfers and wire transfers.
• B. A paper check that is processed through the postal service.
• C. A cash transaction settled at the point of sale.
• D. A debit card purchase that occurs offline.

Answer: (A)

Electronic funds transfer means moving money from one bank account to another using electronic systems instead of cash or physical checks. The best example of two common forms is ACH transfers and wire transfers. ACH transfers are batch-processed electronic payments used for things like direct deposits and paying bills; they’re typically slower and cheaper. Wire transfers move funds between banks quickly, often same-day or next-day, and they usually incur higher fees. The other options describe non-electronic methods (a paper check) or cash, or a card transaction that isn’t the standard bank-to-bank transfer example, so they don’t illustrate EFT as clearly.