Credit and Debit

It’s time to pay bills again, and Erica Easyway sits down at her computer. She checks out her monthly bill for cable and then clicks on the Pay Now button. What a slew of choices! She can pay by

• e-check
• Debit card
• PayPal
• Credit card

Erica decides to use an e-check. On the cable website, Erica is asked to give a whole string of numbers. Here’s what they mean:

The routing number is basically the bank’s identification number, like the account number is the ID for Erica’s checking account. A given bank might have a million accounts so the identification system is actually sophisticated and each sub-component of the account numbers actually… means something.

Using these numbers, Erica transfers money from her checking account to the cable company’s bank account to pay her bill…using the ACH network. ACH stands for Automated Clearing House, which is—wait for it—an electronic network of all the banks in the United States. Simply put, it just means that the banks’ databases all talk to one another electronically. Millions of purchases and payments move through this system every day, with the proper pluse$ and minuse$ landing in the proper checking accounts.

Another way people use ACH is direct deposit of Erica’s paycheck is also an ACH transfer, from her boss’ checking account to hers. And her monthly membership fee to LAFitness that is set up to happen automatically.

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