What are ACH Payments and Should I Accept Them?

As a business, you may think you should accept whatever form of payment your customers prefer. After all, it ensures that you get paid, right? Well, in theory, yes. But in reality, you’re unlikely to accept a barter trade in the 21st century, so when a client suggests a method you haven’t tried before, you might want to look into it first…

Enter ACH, the latest buzzword in financial acronyms. It’s been around for a while (you might know it as EFT – Electronic Funds Transfer). Technically, ACH isn’t the name of a payment method per se – it’s actually the name of the network that facilitates the payment. ACH stands for Automated Clearing House.

It’s a system that allows banks to transfer money among themselves, but these payments have to be initiated by businesses. For years now, ACH has been used for payroll – when your salary magically appears in your account, it’s highly likely that it passed through ACH. So why is it suddenly so popular?

Resolving credit card problems

ACH deals directly with banks, which is why it’s sometimes referred to as a direct transfer. This eliminates the chances of card fraud and minimizes charge-back fees.

ACH is also typically cheaper to process than credit card transactions, and because it goes from one bank to another, there’s no chance of cancelled cards, exceeded card limits, or card theft. This is a blessing for businesses that bill monthly or yearly, because customers sign up for services and the business makes plans based on the promised revenue, only for the card to be rejected at the end of the billing period. Plus, you still have to buy a cancelation fee.

However, ACH payments aren’t as practical for one-off transfers. They work better for regular billing cycles, like insurance premiums, monthly instalments, mortgages, or subscription services, so if your business is based on a daily, weekly, monthly or even annual payment model, ACH is recommended.

Pros and cons of ACH

Unlike other forms of payment, ACH has to be initiated by the recipient. That means you, the business owner, will have to instruct your customer’s bank to send the payment to you, as opposed to the customer telling their bank to send you the money. This is a good way to avoid ‘forgotten payments’ or ‘checks lost in the mail.

If you have a good merchant processor, they’ll transact ACH along with all your card, check, cash, and online store payment processes. ACH payments can take 3 to 5 days to clear, although changes in regulation had promised widespread same-day ACH by March 2018. So if your business has a billing cycle, look into accepting ACH payments from your clients.

For more information on ACH payments and whether you should accept them, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.

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