All About Check Conversion

by MB on January 7, 2008

You’ve probably noticed – if you are still a check writer – that more an more stores are now "converting" your check into an electronic format.  There are three common methods of check conversion, and we will look at them in this post.  All methods utilize the ACH (Automated Clearing House) network to clear electronic debits from your account.  This is the same network that allows you to receive a direct deposit into your checking account, or to have items automatically debited, such as insurance payments.

The first method we will examine is ARC (Accounts Receivable Entry).  This type of conversion is used be businesses receiving payments by mail.  The business would typically scan the check to preserve and image copy, then acquire your banking information, such as routing number, account number, and amount from the check.  This information is used to create an electronic debit, which is transmitted to your account via the businesses bank.  The physical check is retained by the business for a time, then it is destroyed.  A typical company using this type of check conversion would be a credit card company.

The second method of check conversion is POP (Point of Purchase).  This type of conversion is performed in person at the time of purchase.  Typically, the customer would be presented their voided check back, after a sales person captures all needed data.  This type of conversion is typically seen in retail stores.

The third type of check conversion is BAC (Back Office Conversion).  This conversion type is similar to ARC.  Items are accepted at the retail level, but they are imaged and archived, after all necessary account data has been retrieved.  This type of conversion is also typically performed by retail establishments.

If you examine examine your bank statement closely, you may notice these individual conversion codes.

Businesses utilizing check conversion reap a number of advantages.  They will typically receive funds more quickly, since they do not have to wait for a physical check to make its way through the system.  Another advantage is that the business does not have to physically visit a bank to deposit the items.  All communication can be performed electronically.

You can find more information at the check conversion section of electronicpayments.org

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