Electronic payments over the Automated Clearing House (ACH) Network are known as ACH transactions. While credit cards, debit cards, and checks are a good mix to offer your consumers, ACH payments provide you with even more options and the opportunity to improve revenues. Here’s a basic rundown of what ACH payments are, what they aren’t, and why you might want to accept them as a payment method for your company.
An ACH transaction is defined as the electronic transfer of funds from one bank account to another. The ACH (Automated Clearing House) network, which connects thousands of financial institutions across the country, transports these funds.
ACH services for small business is a cost-effective, rapid, and secure method of transferring cash between bank accounts. When a customer pays you using ACH, the electronic funds transfer (EFT) will appear as a direct deposit or direct payment in your bank account.
ACH transactions, on the other hand, are not the same as debit card payments, eChecks, or wire transfers (for reasons we’ll explain later). While all electronic payments are ACH payments, it’s crucial to note that not all electronic payments are ACH payments. Credit and debit card payments, for example, are electronic, but they are not ACH transactions. ACH stands for Automated Clearing House, and it is used to send money from one bank account to another.
Consider ACH services for small business to be an electronic equivalent of a paper chequebook, but with a few key differences. Cash, paper checks, and even credit or debit card payments can all be replaced by ACH transactions.
How Do They Work?
Here’s what happens during an ACH transaction:
Getting the ACH payment started
Just like they would sign a paper check or a credit card receipt, they have to sign an ACH authorization form (or vocally consent to it during a recorded phone call) (or verbally agree to it during a recorded phone call). Customers can opt to set up a one-time payment, a regular payment, or even a series of payments on certain dates when using ACH.
Receipt of an ACH payment
Your bank account will electronically pull the agreed-upon payment from your customer’s bank account once an ACH transfer has been authorised. Previously, you had to wait 3-5 days to get an ACH payment services, but new rules have been implemented that allow for same-day processing. The only snag with ACH payments is “bounced” transfers, which occur when there are insufficient money in your customer’s account. ACH transactions, like physical checks, cannot be completed unless the payer’s account has sufficient funds.
What are the differences between ACH payments, eChecks, debit card transactions, and wire transfers?
On the surface, these electronic transactions appear to be comparable, yet they are actually conducted in quite distinct ways.
ACH payments vs. eChecks: Which is Better?
The names “eCheck” and “ACH payment services” are sometimes used interchangeably, and they both transmit funds electronically between two bank accounts. The difference is that eChecks are one-time EFT payments, but ACH transactions rely on the merchant’s storage of client bank account information (which allows for regular ACH payments).
Debit cards vs. ACH payments:
While both ACH and debit card transactions withdraw funds from a customer’s bank account, they do it in fundamentally different ways. What matters most to you as a business owner is that these payments are processed by a different partner, which means that an ACH transfer will have substantially different transaction rates and dispute resolution procedures than a credit card transaction. When it comes to ACH price (as opposed to debit or credit card transaction fees), the distinction is often to your advantage.
Wire transfers vs. ACH payments:
Wire transfers are handled by two separate banks who work together to verify money and finalize the transaction. If you’ve ever received a wire transfer, you may have noticed that both the sender’s bank and your bank levied a fee for the transaction—not it’s uncommon for both the sending and receiving banks to charge between $10 and $35 each transaction. This reflects the additional labor required by each bank to set up the transfer.
ACH transactions, on the other hand, go through the Automated Clearing House, which can be thought of as an electronic highway connecting banks. Rather of needing to “construct” their own road to transfer cash, two banks can simply join the flow of payments already flowing over the ACH “highway.” ACH batches and automates payment flows between banking institutions, resulting in cost savings for you!
Why Should a Company Accept ACH Payments?
ACH transactions are one of the most easy and cost-effective ways for businesses to collect payments. Customers and company owners alike benefit from ACH transactions since they are quick, flexible, and typically less expensive than accepting credit or debit cards. The following are three key advantages:
Transaction fees are reduced.
ACH transactions typically have cheaper fees, resulting in significant cost savings over time. The greater your earnings, the larger the chasm would get.
Because of the convenience and quickness of ACH payments, you no longer need to go to the bank to deposit paper checks. This benefit may save you time depending on your business, allowing you to focus more on increasing profits rather than managing them.
Billing that is recurring and flexible.
The convenience of ACH payments is that they can be set and forgotten. This ensures a steady stream of cash for your company: you may set up ACH payments as one-time or recurring transactions, or schedule them for specified days in the future.
Accepting ACH Payments: How to Get Started
It’s rather simple to set up ACH payments. The steps are as follows.
- Sign up for a merchant account. Check out the top questions to ask before opening a merchant account if you’re not sure how they work or want to learn more.
- Request that your consumers sign an ACH authorization document. (This simple ACH authorization form template might be used.)
- Have clients call or fill out an online form to provide information about their checking account and routing number.
- Submit or save the payment information. The ACH transaction is started as a result of this.