An Automated Clearing House or ACH is an electronic network for financial transactions that process large volumes of credit and debit transactions in batches, including direct deposits, payroll payments, insurance premiums, mortgage loans, and point of sale check conversion transactions. Effectively an ACH is a computer-based clearing facility between depository institutions.
Previously ACH transactions were mainly used by the government and the commercial sector, but businesses are also beginning to use ACH online to facilitate customer payments to offer their customers a broader range of payment options.
By opting for an ACH, businesses can accept payments similar to electronic fund transfers or check payments, but ACH payments differ because they give control of the process to the merchant who initiates the payment rather than the customer.
What does that mean?
If a customer writes out a check for your business, you may have to wait for up to seven working days before you know that it is not a bad-check that will be returned as ‘unpaid’. Also, if a customer agrees to pay by EFT for a purchase, you have to wait until the customer actually gets down to making the transfer. By using an ACH, you need only to obtain your customer’s consent (written or oral) and their checking account information to initiate a process to withdraw funds from the customer’s account. This means that the risk of bad debts is greatly reduced.
The ACH network is regulated by the National Automated Clearinghouse Association (NACHA) in conjunction with the Federal Reserve. They introduce and implement rules and regulations for the network that ensure efficiency, strengthen risk management, lessen returns and limit exceptions. That means that both you and your customers can be assured that all transactions are secure.
Once you sign up for ACH payment processing your merchant account services provider will explain the NACHA rules to you and advise you of any changes. By understanding the NACHA rules, you can also to identify opportunities to leverage the ACH network to meet your business needs.
What does ACH mean for your business?
Your customers’ payment preferences are constantly evolving so your business must keep pace with payment technology if you want to stay competitive. By accepting card payments as well as ACH payments, you are giving your customers different payment options to choose from.
At the same time, you are also reducing the risk of bad checks and holding large amounts of cash. Opting for ACH payments will definitely add value to your business and to your customers’ buying experience. Also, offering different secure payment options indicates that you run a professional operation that cares about your customers’ choices and security.
Speak to your merchant account service provider about an application, and they will take you through all the steps. Be sure to ask questions about any aspects that are unclear to you. For more information about ACH payment transactions, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.