29 Jan 2025
The world is evolving fast, as are people’s lifestyles, with technological advancements happening exponentially. Significantly, after COVID-19, people have shifted to doing most of their life tasks through online platforms. With a simple click, you can pay for groceries, buy a new outfit, call a car ride, and even send money online. As far as personal and business transactions are concerned, more people now prefer Electronic Fund Transfers (EFTs) over traditional payment methods.
But what are EFTs and traditional payment methods, and how are they different? Which one will work best for you and why? Let's take a deep dive and find the answers!
Before entering last-minute details, you must understand the general definitions of EFTs and traditional payment methods. Here is what you should know about these terms:
Electronic Fund Transfer (EFT) is a digital payment system in which you can move money directly from your bank accounts instead of having to take the cash out first. It is far more convenient and fast, which is why it has become the norm among most people now. EFTs are also time-saving and cost-effective since you no longer need to commute to the bank to withdraw money. EFT payment advantages mean that they do not involve paper-based processes.
EFTs include wire transfers, direct deposits to bank accounts, ACT transfers, card payments, ATM transactions, and online banking transactions.
Let’s look at some of the advantages of EFT payment before looking at some of its drawbacks:
Typically, EFT payments are processed as soon as you click the payment button; if not, they are processed within a few hours. This makes it an excellent choice for people who often need to make urgent payments since EFT payments are relatively fast.
EFT is popular and gaining rapid traction because it is extremely convenient. One of ETF's payment advantages is that you can transfer funds anytime and anywhere as long as you have a mobile device or computer and a stable internet connection.
The fantastic benefit of EFT is its eco-friendliness. It is a paperless solution, so there is less need for physical resources such as checks and receipts.
As good as something might seem, it has always a downside, and EFT is no exception. This must be kept in mind when choosing the best payment method:
EFT’s payment advantages are significant but only available with an internet connection. If you do not have a mobile phone or computer, you can't benefit from EFT; if you have a phone but no internet, you still can’t take advantage of EFT technology.
Even in the virtual world, crime is rampant. There are many cases of online theft and cybersecurity breaches worldwide, which makes people nervous when using EFT for fund transfers. If robust EFT payment security systems are not implemented, cyberattacks could easily threaten people’s hard-earned money.
Traditional payment methods involve transferring funds through cash, checks, and wire transfers. These methods are popular because they have been around for decades and offer a sense of comfort and familiarity. Traditional payment methods are still used today in various cases where digital payment options are either not available or simply not a preference.
Here is why traditional methods of payment still haven’t died out yet:
Cash and checks can be used pretty much anywhere, including most remote areas where digital infrastructure is limited or non-existent. Traditional payment methods are widely recognized, so it is always a good idea to have some cash in your pocket, just in case.
Paying through cash or checks means you don’t always need a phone or Wi-Fi with you for important payments. This method is also accessible to everyone since it doesn’t require any technical knowledge either.
Paper-based payments are physical proof, which is quite the reassurance regarding sensitive transaction matters.
Traditional payment methods definitely come with certain limitations:
One of the differences between EFT and checks is this: Checks and money orders might be tangible evidence of payment, but they are slow to process. The transaction completion might take several days, which is inconvenient compared to instant EFT transactions.
If you have physical cash or a cheque in your pocket, someone could easily steal it, or you could lose it. These types of payments can also be forged, so the risk of forgery is very real regarding traditional payment methods.
Cash is made from paper, and paper is made from trees. Cutting down more trees to make more cash contributes directly to environmental degradation as people continue to consume the resources.
When comparing EFT vs wire transfer, it is crucial to note that wire transfer is a form of EFT. Both of these payment methods are electronic payment methods. However, there are distinct differences between the two:
Regarding the speed of EFT payments, the whole processing time might take 1 to 3 business days to complete the transaction, depending on your chosen payment method. However, with wire transfers, the transaction is completed either instantaneously or within hours.
Regarding wire transfer fees vs EFT fees, wire transfers are usually a bit more expensive. This is where other EFTs earn a plus point of having very low to zero costs associated with it. So, if a funds transfer is not urgent, people prefer another form of EFT over a wire transfer since it's worth waiting.
Another major plus point about an EFT is its payment security. It’s far more secure and has a robust safety system with authentication processes and encryption codes, which ensures the safety of your hard-earned money.
Choosing the best payment method is crucial for anyone trying to send money cost-effectively. Here are some of the factors to consider before you choose a certain payment method for the transaction:
Electronic payments vs traditional payments: It's all about your preferences. If you are more concerned about finding a convenient and easy payment method, see what type of payment method offers the most convenience. For example, if you live in bigger urban cities, you might want to stick to EFT since most cities are technologically advanced.
What kinds of payments are essential to consider? Personal payments, international online money transfers, and business transactions are some types of payments.
When choosing a payment method, you must consider hidden charges, transaction fees, and other costs associated with transfers.
Before you pay someone or send money to your family back home, ensure you have reviewed all the safety protocols and risks associated with a payment method.
EFT is a great option for people who make recurring payments such as bills or subscriptions. EFT payment advantages include international transfers and urgent payments that need same-day processing are best handled through EFT payments. Also, if you are tech-savvy and value convenience, you might want to stick to EFT.
If you live somewhere with little digital infrastructure and people do not have much technical know-how of digital payments, sticking to traditional payment methods is ideal. This is ideal for you if you prefer checks and tangible payments for record keeping. Also, if the payment is small and low risk, physical payment methods are much less hassle.
Choosing the best payment method for a transaction can be a little intimidating, considering the plethora of options available. However, when it comes to making a money transfer of any sort, including personal and business transactions, you must only choose a method based on your priorities and convenience.
EFT is typically slower but cheaper, suited for regular transactions, while wire transfers are faster and more expensive, ideal for urgent transfers.
Yes, they utilize encryption authentication and are governed by strict financial regulations to ensure security.
They offer speed, lower costs, and convenience without the need for physical handling or mailing.
They can be slow, costly, and less secure, especially in terms of physical theft or fraud.
Look at your transaction frequency, the urgency of the payment, associated costs, and security requirements to make an informed decision.
