What are ACH Payments?
ACH (which stands for Automated Clearing House) is a highly reliable and established electronic fund transfer system used by just about every bank in the United States. It allows quick and safe transactions between parties at a lower cost than most online and credit card transactions. Put simply, an ACH transaction involves the request to debit a certain amount of money from one bank account, and credit it to another electronically (no paper involved).
Here is an overview of how the ACH process works:
Is it Safe?
In short; YES. The ACH network is very reliable and governed by NACHA, The National Automated Clearing House Association and also monitored by the Federal Reserve. Not to mention some of the same personal information required to perform an ACH transaction (bank account number and routing number) is printed clear as day at the bottom of a printed check!
Are ACH Payments Widely Used?
Accepting ACH payments have become more and more popular with the move to automated online payments and recurring billing. In fact, in 2011 the ACH Network processed over 20 billion transactions totaling a value of $34 trillion! Plus you’ve most likely already used the ACH network in the past. Some common uses of ACH payments include:
- Direct Deposit of payroll, Social Security and other government benefits, and tax refunds
- Direct Payment (or direct-debits) of consumer bills such as loans, utility bills and insurance premiums
- Electronic Checks (E-checks)
- Federal, state and local tax payments.
Is Accepting ACH Expensive?
ACH processing is one of the most cost effective ways to receive payment from your customers, and is typically the lowest form of electronic payment you can accept. In most cases the entire cost is a flat fee ranging from 25 – 75 cents per transaction. Compare this to a credit card (25 cents plus 2.5% for example) or standard cost of a paper check (an average of $1.22 per check) and you’ll see that ACH is more cost effective.
Why Should I Accept ACH Payments?
The reasons to use ACH are going to depend on what type of business you maintain. If you’re a brick and mortar business that does the majority of transactions at a cash register, ACH may not be the most effective form of payment for you. However, if you’re business relies heavily on online payments (and better yet, recurring online billing) then ACH may be a great fit!