Check Conversion Information

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How Does "Check Conversion" Work?

After a consumer makes a payment by check, it is processed directly by the billing company. The check is used as a source document to retrieve the information necessary to create an ACH transaction in lieu of processing the paper check. First, information is taken from the magnetic ink character recognition (MICR) line at the bottom of the check. The MICR line contains the routing number of the payer bank, the number of the check and the account number of the consumer. Then the amount of the check is captured using a variety of automated methods. The billing company makes a copy of the check and the original check is destroyed to ensure that the check cannot be used for any other purpose. The billing company or processor subsequently compiles a file of multiple ACH transactions for delivery to its financial institution, and ultimately, for settlement.

Once the consumer's account is electronically debited, the payment is listed on their bank or credit union account statement, including the date of the payment, name of the company paid, check number, and amount of payment.

Other names for this type of check conversion, either specific or generic, include electronic check, e-check, and accounts receivable check.

The Impact of Bill Payment Check Conversion on Consumers

Check conversion in the bill payment cycle - the process of converting a paper check into an electronic payment - preserves the choice of payment medium for a consumer when making a payment. Check conversion is simply a method of processing payments. The only difference the consumer may notice is that he or she will not receive a cancelled check back from their bank. The financial services industry estimates that upwards of 50% of consumer currently do not receive cancelled checks from their bank and those consumers would notice little or no difference if their checks were converted. The other difference consumers may notice is that on their bank statement the converted payment may be listed with the ATM withdrawals, Direct Payments and other electronic debits. On the statement, the converted check payment will include date of the payment, the name of the company paid, the check number, and the amount of the payment. The information on the statement provides the consumer with an advantage - they now have the name of the company paid by check on the bank or credit union statement. The ACH Operating Rules stipulate specific posting requirements for the RDFI that guarantee that the consumer sees the necessary payment detail on their statements. Furthermore, bank or credit union statements are generally considered proof of payment and the IRS accepts an account statement as proof of payment.

You can read more about Check Conversion at our Check Conversion FAQ.

You can save the expense and hassle of mailing paper checks by signing up for our ACH program.