Merchants looking for a more cost-effective way to process payments without fewer hassles should consider ACH processing. ACH payments are becoming more attractive to businesses due to affordability and convenience. Learn more about how ACH processing can benefit your business.
The ACH Explained
Automated Clearing House (ACH) is the network that connects every financial institution and bank within the United States. The network is managed by and its rules and regulations are set by NACHA, a non-partisan governmental organization. Two other entities involved in the process are the Originating Depository Financial Institution (ODFI) and the Receiving Depository Financing Institution (RDFI). A transaction originates from the banking agency, ODFI, and the RDFI is the institution that receives the funds routed from the ACH.
When a payment is made via the ACH, the transaction begins with the firm’s bank sending an ACH debit entry to the ODFI. From there, the ODFI connects with the RDFI and they interface with the customer account. This is to ensure that there are sufficient funds available in the bank account from which the money is to be withdrawn. The transaction is processed and the funds are sent if there is enough money in the account. If not, a reject code is sent.
Basically, any time you receive an electronic funds transfer (ETF) directly into your bank account, it got there via the ACH. An ETF and an ACH payment are terms that are used interchangeably. Though ACH and ETF are considered the same, a wire fund transfer is separate. Wire payments go through faster because they are processed in real time instead of via batches a few times per day, like ACH transactions. Because of the way they are processed, wire payments are guaranteed on the same day it was processed. Also, wire transfers are more expensive than those processed via the ACH. Often, a flat fee or a flat percentage fee is charged for each transaction.
It is important to note that though NACHA doesn’t set up small businesses for ACH payments that doesn’t mean your business can’t take advantage of this type of processing. Any bank or third party processors that are created to take ACH payments can assist small businesses.
The 4 Benefits of ACH Processing
- Stop Worrying About Expiring Credit and Debit Cards: Since ACH payments are withdrawn directly from bank accounts, there is no longer a concern about expiration dates. Typically, credit and debit cards expire every three to four years, depending on the card. When an expiration occurs, it initiates a chargeback, which negatively impacts a business.
- Processing Payments is Cheaper with ACH: Typically, it will cost between $0.25 and $0.75 per transaction to process an ACH payment. Depending on the credit processing company and an individual merchant’s credit history and other factors, merchants can pay rates starting at 1.5% plus a per transaction charge to process payments.
- Save Time and Money: When you use ACH processing, you no longer need to send paper bills, receipts, and checks. Since everything is done electronically, you also no longer have to waste time going to the bank to deposit checks.
- Give Your Customers More Options – Any time you can take a customer experience to the next level, your business is winning. By offering individuals multiple ways to pay, you are expanding your company base. If your business allows for recurring billing, they can arrange to have payments taken out each month and never worry about paying late. In general, customers like options. Whenever you put the choice in their hands, it is an advantage.
It is important to remember that ACH processing should be just one of the options you offer customers. Though ACH processing offers many positives, it is not perfect. ACH transactions that are made after business hours or on the weekend will not be processed until the beginning of the next business day. Also, a same-day transfer limit for an ACH payment is no more than $25,000.
The Final World on ACH Processing
Since funds are directly transferred to a bank account, ACH transactions are some of the most convenient, secure, inexpensive ways to accept payments. Also, ACH processing is something small businesses can use to better their customers’ overall experiences.
No matter what your situation, ACH processing is something you should consider. If you are a small merchant who wants to take advantage of these benefits, contact a payment processor, like, eMerchantBroker.com (EMB). We are a trusted, reliable payment solutions provider that specializes in working with high-risk businesses of all sizes.