ACH payments have many advantages for merchants, including lower processing costs than credit cards, 2-3 days settlement time (sometimes 1 day), and excellent reliability and data security. The ACH (Automated Clearing House) network is operated by Nacha, a network that connects all U.S. financial institutions and moves nearly $60 billion in transactions annually in the U.S. Essentially, the ACH network functions like a virtual checkbook, moving funds from the customer’s bank account to the merchant’s bank account.
Because ACH payments are processed in enormous batches, fees are modest compared to credit card processing, averaging a little less than $0.30 per transaction (high risk merchants can expect the fees to be higher, but never cost-prohibitive).
ACH payments are efficient, safe and affordable for merchants, and customers like them, too. Some customers simply do not like using credit or debit cards, either as a matter of principle or because they are fearful of data theft. Customers may also view ACH as a safer, more secure method of payment (and it is very secure). This attitude comes into play especially for recurring payments and large one-time payments.
If your company does most or all of its business in the U.S., ACH is an excellent supplement to credit card payment for the reasons noted above. For high risk merchants, ACH is especially valuable because qualifying for ACH is easier than qualifying for a credit card merchant account — all that is required to qualify is a business bank account at a U.S. financial institution. We do a lot of work with high risk merchants, and ACH is often the way these companies keep revenues rolling when they have limited or no ability to accept credit cards.
ACH payments are also a terrific option for merchants using a recurring billing model. Credit cards have expiration dates, which can disrupt or end the flow of recurrent payments, sometimes without either the customer or merchant being aware this has happened. With ACH, once the recurring payment schedule is set up, it does not expire; it can be terminated or changed only by the customer or merchant.
Speaking of expiration dates, involuntary credit card churn is a problem for all merchants, not only recurring billing businesses. Customers may use expired credit cards for a one-time purchase, not realizing the card has expired but setting up a situation that takes time for both the customer and the merchant to resolve. ACH provides a level of continuity that satisfies merchants and customers alike.
Chargebacks are possible for ACH payments, but less likely to occur than with credit cards. For ACH, customers have 90 days to initiate a chargeback, whereas with credit cards, 120 days is the norm. And, as noted earlier, ACH payments (recurring and one-time) cannot be rejected because the card has expired. Of course, an ACH payment will be bounced if funds in the customer’s bank account are insufficient to cover the purchase.
ACH payments are handled in a number of ways. In-store, scanners turn paper checks into digital checks usable for ACH transactions. Virtual terminals are used for ACH transactions for fax/phone/mail purchases and for purchases at meetings or events. Online payments are initiated using payment gateways that take users to a webform where they enter the necessary information.
ACH payment capabilities can be added to an existing merchant account you’ve already set up for credit card purchases. If you are a startup or don’t have a merchant account, we will get you up and running with ACH quickly. Contact us now to learn more and get started with this versatile, customer-friendly payment processing option.