DEFINITION of 'Electronic Funds Transfer Act'

A federal law that protects consumers engaged in the transfer of funds through electronic methods. This includes the use of debit cards, automated teller machines and automatic withdrawals from a bank account. The act also provides a means of correcting transaction errors and limits the liability from any losses due to a lost or stolen card.

BREAKING DOWN 'Electronic Funds Transfer Act'

This law was passed in 1978 as a result of the growth of electronic ATM machines and electronic banking. The use of paper checks has steadily declined since then, but the check served as hard evidence of payment. The explosion of electronic financial transactions created a need for new rules that would give consumers the same level of confidence that they had in the checking system. This includes the ability to challenge errors and correct them within a 60-day window, and to limit liability on a lost card to $50 if the card is reported as lost within two business days.

RELATED TERMS
  1. Debit Card

    A debit is a payment card that deducts money directly from a ...
  2. Electronic Check

    An electronic check is a form of payment made via the internet ...
  3. PIN Cashing

    A type of fraud in which a stolen credit card or debit card is ...
  4. Carding Forum

    A website dedicated to the sharing of stolen credit card numbers. ...
  5. Stored-Value Card

    A stored value card is a type of electronic bank debit card.
  6. Cloning

    The copying of stolen credit or debit card information to a new ...
Related Articles
  1. Personal Finance

    Credit versus debit cards: Which is better?

    Credit and debit cards may look identical, it is important to note their differences. Be strategic about which card you choose and learn more about which is better for you.
  2. Tech

    How To Keep Your Debit Card Transactions Safe

    Debit card use has become more popular than ever, but not every consumer knows what they need to do to make sure they keep their debit card safe.
  3. Personal Finance

    8 Ways To Avoid Getting Burned By Prepaid Debit Cards

    These cards have many differences from traditional debit and credit cards that can cost you money if you don't know what to watch out for.
  4. Personal Finance

    Debit Cards: Why They're Not As Safe As You Think

    Ditching your credit card can be a smart move, but debit isn't yet an equal alternative.
  5. Personal Finance

    The Dangers of Getting a Paycheck on a Prepaid Debit Card

    Receiving your paycheck on a prepaid debit card may seem like a boon until you discover all the fees that can come with it.
  6. Personal Finance

    Credit, Debit and Charge: Sizing Up The Cards in Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  7. Personal Finance

    Does a Lost or Stolen Credit Card Hurt Your Credit Score?

    Learn the ways in which a lost or stolen credit card can hurt your credit, and understand the steps you can take to protect yourself if this happens.
  8. Personal Finance

    Purchases You Should Always Make With A Credit Card

    Credit cards aren't always bad possessions to have. There are certain perks associated with using credit cards as we make routine or irregular purchases.
  9. Personal Finance

    How To Find The Right Prepaid Debit Card

    Prepaid debit cards are becoming increasingly popular. Here are some tips for choosing the right prepaid debit card.
RELATED FAQS
  1. What is the electronics sector?

    Learn more about the electronics sector and the challenges and opportunities presented to electronics companies by new and ... Read Answer >>
  2. What happens when my bank account is debited?

    A debit to your account happens when you use funds to purchase goods or services. Understand the process that takes place ... Read Answer >>
  3. Can I use a prepaid credit card to pay bills or transfer money to other accounts?

    Learn how prepaid credit cards enable convenient bill payments and transfers. Explore different fees charged for such transactions. Read Answer >>
Trading Center