ACH vs. eChecks: What’s the Difference?

The terms ACH and eChecks are used synonymously, and there is only a minor difference between the two. To better understand this difference, consider the definitions of each term.

What are eChecks and ACH?

ACH, or Automatic Clearing House, is the process of the electronic moving of funds between bank accounts. It is a type of EFT (Electronic Funds Transfer). The ACH is a network that connects all banking and financial institutions within the United States. ACH processing allows you to use your bank account information to process payments. Whenever you pay a bill via a website and you are required to provide your account and routing number, it is an example of ACH. ACH can also be used to post a credit to an account, like a direct deposit for a payroll, for example. With an ACH merchant account, a business is able to withdraw payment from their customers’ bank accounts directly, when authorized to do so by the customer.

An eCheck is a type of electronic funds transfer that relies on the ACH network to process payments. Money is withdrawn from the payer’s checking account, transferred over the ACH network, and deposited into the recipient’s checking account. The eCheck (or electronic check) is a modern version of the old-fashioned paper check, and makes electronic payments more convenient. Paper checks can also be converted into eChecks by businesses, and submitted and processed electronically. This makes for a smoother and faster process for the business owner.

In short, eChecks are just like paper checks, except that 1) because they are not printed on paper, they can be accepted over the phone, through the Internet, or by fax, and 2) business owners need to open an account with an eCheck processor in order to accept eChecks.

The key difference between eChecks and ACH

Although they are almost synonymous, eChecks and ACH represent different information flows, as well as the legalities that surround them. The main distinction is the party that holds the payment information and sends the payments. For other ACH processes, it is typically managed by specific entities that use the banking information that you submit. The risk management of ACH compared to eChecks also differs.

Accepting eChecks in your business

To start accepting eChecks, your business needs to open account with an eCheck processor.  In addition to being able to accept checks over the phone and online, accepting eChecks also typically speeds up the processing time for such transactions, allows you to track funds in real time, and saves you trips to the bank to deposit paper checks. Electronic checks, processed through the ACH network, are one of the most secure methods of payment around and are backed by banking institutions and the United States Treasury.

For more information about ACH vs. eChecks or to sign up to accept eChecks from your customers, you can go to Charge.com’s eCheck information and signup page.

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