How Do ACH Payments Work?

If you’ve been running an online business for a while, or if your face-to-face business has an online component, you may have noticed the increased prevalence of ACH payments. In the past, it was primarily an in-bank thing, but now it’s spreading to regular consumers and smaller digital enterprises. ACH stands for “Automated Clearing House.” It’s the network that links banks and allows them to transfer cash among themselves on behalf of their customers. It’s a quick, safe, fully encrypted procedure that has benefits all round. The benefits include the following:

  • It’s generally cheaper for banks, businesses, and buyers.
  • It’s far more secure than other options.
  • It minimizes delays, bounced payments, and chargebacks.
  • It’s easier to track the money involved.

The check isn’t in the mail

When a customer pays via ACH, you’ll never have to remind them, listen to excuses, or negotiate extensions. This is because ACH payments are pre-approved. The customer formally gives their bank permission to pay you on a specific date. When that due date arrives, you simply notify the bank and they’ll send you the money. Because it’s a bank-to-bank transaction, it has additional layers of security that aren’t available for credit card transactions. ACH payments are processed in bulk, which is one reason why they’re generally cheaper.

Banks consolidate all their ACH payments and send them as a batch once or twice a day. This makes charges and expenses significantly lower than processing each payment individually. If you catch the first ACH batch of the day, then you can receive your cash that same day. If you’re slotted into the second batch of ACH bank transactions, you may have to wait until the next business day. This means – on average – ACH payments clear within 24 hours. Due to their bulk processing structure, they are ideal for repetitive payments.

Talk to the bank

To initiate ACH payments, your customer has to formally notify their bank that a certain amount needs to be paid out to you. It could be scheduled every week or month, so it’s ideal for premiums, mortgage payments, loan instalments, or even a credit card repayment plan. Customers only have to instruct their bank once. After that, it’s your business that approaches the bank and reminds them to facilitate the payment. ACH payments work by direct deposit, where the cash moves directly into your bank account.

The transaction is paperless, and if your payment processor offers ACH transactions, you can manage them on the same platform as your credit card payments and e-checks. Your payment processor will liaise between your customers’ bank and yours. They’ll be the ones to notify the bank when your ACH payment is due.

ACH Payment Fees

As is the case with all types of payments aside from cash, which has its own labor-intensive requirements involved with getting it into your operating account, there are fees associated with ACH payment protocols. However, as mentioned above, they are generally less expensive than other forms of electronic payment due to the bulk nature of their transfers. In general, you’ll be paying significantly less in fees to accept an ACH payment than you will payment by way of a credit card.

Overall, statistics indicate that the fee for an ACH payment is usually less than 50 cents per deposit. However, situations obviously vary as do the circumstances that surround them, so it’s possible for fees associated with ACH payment capabilities to be structured as follows, depending on your provider:

  • Flat fee per transaction
  • Percentage fee per transaction (5% – 1.5%)
  • Monthly fee
  • Batch fee
  • ACH return fee
  • ACH reversal

The last few terms may need some explanation to get a full idea of the ACH meaning and what it can do for your business. A batch fee means that when you run a batch, you pay a fee that’s usually relatively nominal. If there are insufficient funds associated with an ACH payment, there could be a fee that arises in that regard, and reversing an ACH payment can also carry a fee.

As is the case with any mode of electronic payment, you should speak to experienced professionals who can help you decide whether ACH payment capabilities make sense for your organization. The team at can walk you through several different scenarios and help you come to a decision that’s best for you.

For more information on how ACH payments work, or to sign up for a merchant account, please call (888) 924-2743 or go to

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