All You Need To Know About Processing ACH Payments

Jul 31, 2017

In every business transaction, both the merchant and the customer like having options. Different methods translate to more opportunities for the trader, and flexibility for the buyer. As such, merchants especially prefer payment channels that don’t cost too much to process. An example of these is Automated Clearinghouse Payments (ACH).

The best thing about ACH compared to credit cards is that the fees for accepting payments are much lower. Consequently, start-ups and small businesses are processing ACH now more than ever. If you’re thinking of accepting ACH or e-check payments, here’s all you need to know.

What is ACH?

ACH is an e-commerce payment system that allows merchants to receive funds electronically, directly from a customer’s checking account.

How can you accept ACH payments?

To process ACH transactions, you will need to partner with a suitable merchant account provider. EMB, for instance, offers ACH processing to its clients at friendly rates and no set-up fees.

The three ways you can process ACH transactions are:

  1. Check scanner

If a buyer pays with a paper check, you can use a scanner to transform it into a digital ACH token and deposit it remotely into your processing account.

  1. Virtual terminal

For keyed-entry transactions like telephone and mail orders, you can type in a client’s account information into a virtual terminal to process the ACH payments. Some customers feel more comfortable when recurring fees come directly from their bank accounts than through credit cards.

  1. Website payments

It might take some nudging to get your clients to shift from easy payment services like PayPal to online ACH transactions, but in truth, the cheaper fees are worth the effort. Processing a $100 PayPal transaction, for instance, costs $3, while with ACH, it costs as little as $0.25. As a result, many merchants are getting creative to influence their clients’ payment decisions.

ACH vs. credit card transactions

Both ACH and credit cards are electronic funds transfer (EFT) channels.  However, ACH moves funds from a customer’s checking account into yours directly. It, therefore, bypasses card networks, and their interchange and assessment fees. This makes ACH processing far less expensive than card transactions.

Service companies like plumbers, accountants, and attorneys can benefit more from ACH than electronic cards. ACH streamlines the recurrent billing process by reducing transaction costs and saving time.

On the flip side, sales completed with ACH don’t guarantee funds to the merchant but are merely a request to the client’s bank to release the money. Such transactions are processed in batches and usually take a few days. ACH requests can also be rejected for reasons like insufficient funds or a closed account, and you won’t know until several days later.

For this reason, many retailers choose credit cards over ACH. Credit cards use a network, like Visa or Mastercard, to verify if a customer is within their credit limit. After the network approves the purchase, your payment processor is obliged to deposit the funds into your account.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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