Electronic check processing

Electronic checks (eChecks) are a payment type automatically debited from a bank account. The buyer selects to pay with an eCheck and provides routing and account details instead of the card information. While eChecks are generic, transactions can vary based on what eChecks are involved. When it comes to eChecks, high-risk merchants have different requirements than non-high-risk merchants. For example, high-risk merchants often are unable to qualify for ACH accounts because they do not have adequately low chargeback ratios. EMB helps approved high-risk merchants with eChecks.

ACH is a good option for high-risk merchants if the business can maintain sufficiently low chargeback ratios. Chargebacks must stay below 0.5% for a merchant to maintain an ACH eCheck merchant account. Based on what is sold, high-risk merchants often have difficulty meeting this requirement. Additionally, returned transactions cannot surpass 15% for an ACH eCheck merchant account. Additionally, high-risk merchants in certain industries like adult entertainment, nutraceuticals, and precious metals are unlikely to obtain ACH eCheck merchant accounts.

Not all ACH eCheck solutions are ideal. For example, merchants should avoid ACH eCheck solutions that use the merchant’s bank to perform the processing and cleaning of ACH eCheck payments. Merchants should also avoid ACH eCheck solutions that make a copy of electronic checks and either deposit the actual check into the merchant’s account for processing and clearing or send the merchant a check copy for the merchant to deposit into the merchant’s bank account.

eChecks exist to provide a convenient method to accept payments. The nuanced electronic process involving eChecks contains four steps. First, the purchaser authorizes the amount requested by the seller to be withdrawn from the purchaser’s account. Second, after payment is authorized, the merchant initiates the payment process by inputting the corresponding financial details into the payment gateway. After the financial details are verified by the processor, the merchant submits the payment to the bank. The payment then commences the eCheck transaction process. The transaction amount is withdrawn from the purchaser’s account, deposited into the seller’s account, and a receipt of payment confirmation is sent to the purchaser.

When it comes to eChecks versus credit card rates, eChecks transactions are much less costly to process than credit cards. The primary difference in these costs is the associated fees and involved networks.

ePayment (EFT payment) refers to the electronic transfer of funds from one account to another through an online network. EFT covers several types of different transactions including ACH transfers, direct deposits, wire transfers, and eChecks. The Automated Clearing House (ACH) network is the system tasked with processing and transferring funds between merchants and purchasers’ financial institutes. ACH payments are processed in two ways: ACH debit transactions or bill payments (in which money is taken from an account by the merchant) and credit transactions or direct deposit (in which the consumer or merchant account making the payment starts the transaction.) eChecks are both ACH debit as well as EFT payment because this method relies on electronic funds transferred through the ACH network.

Like traditional checks, eChecks sometimes bounce and can end up rejected and returned. Sellers and purchasers should take the necessary steps to avoid this from happening. Some reasons eChecks are rejected include inadequate funds, blocked accounts, fraud, inaccurate account details, and deactivated/closed accounts. Businesses that want to avoid rejected eChecks should consider utilizing a check verification service.

Yes, customers can claim chargebacks on eChecks. This is a much stricter process, though than the one involving credit card transactions. eCheck chargebacks are more difficult for customers to obtain. While consumers have 180 days to dispute credit card transactions, they have a third of that time (60 days) to dispute eCheck payments.