High risk ACH check processing accounts are not as hard to come by as you might think. Many businesses who seek the benefits of automated clearing house processing struggle with the strict rules and high set-up fees many banks apply to high risk industries. First of all, let’s take a look at what ACH check processing is and how it actually differs from a typical credit card processing system. Then we’ll get into why ACH can be so useful for a high risk business, and how you can go about setting one up if the banks you’ve tried so far are not playing ball.
What is ACH Check Processing?
ACH essentially allows you to process payments directly from a customer’s checking account, without the need for a credit card. It’s a form of ‘electronic check’ – it operates similarly to a written check, in the sense that it is an authorization from the customer which lets their bank know you have permission to process the agreed amount from the customer’s account.
How Does It Work?
The customer will provide you with essential information about their bank account, which you then to perform the electronic check transaction. At this point your payment processor will credit your account for the amount in question. The amount is debited from the customer’s bank account via the Automated Clearing House system – this usually takes one or two business days to process. At this point, the transaction will only complete is there are enough funds in the customer’s account. If there are insufficient funds in the customer’s account, the processor will debit the money back out of your own account.
Why Is It Useful for High Risk Businesses?
The usefulness of ACH processing for any business is clear. It allows you to take payment from clients before they actually have the cash on hand, meaning you can keep cash flow more consistent. But, of course, there are many problems associated with using ACH for certain types of high risk businesses.
Because of the waiting period for ACH check processing, it can be hard for high risk businesses to find banks willing to offer them ACH processing facilities. High risk businesses may be more likely to find customers have insufficient funds when the check is processed – for example, credit repair or debt collection agencies tend to be processing payments from people who are in financial difficulties and may not have the funds available on time. High risk businesses also tend to experience a higher rate of disputed payments or reversed charges. Generally, there is a 7 day window from the debiting of a customer’s account in which the bank may reverse the charge. After this 7 day period, your ACH check processor will release the funds to you.
ACH processing is not only useful for processing payments from your customers – it can also be used for paying your own employees, and again in that scenario it can be ideal for companies with irregular cash flow.