ACH eCheck services are a simple an easy way for businesses and consumers to enter the e-commerce world. Unfortunately, there is some confusion surrounding the services, which include ACH payments and eCheck processing, because many in the financial industry use the terms interchangeably.
On a fundamental level, ACH payments and eChecks are the same because they both make payments or deposits by transferring money from one bank account into another. ACH (Automated Clearing House) is the main network that processes most of the electronic transactions in the United States while electronic checks are a form of payment. Since eChecks, which are completely electronic enhancements to paper checks, uses the ACH network to connect a payee with the banking institution and they are debit transactions, electronic checks and ACH payments are viewed as the same.
When you use ACH eCheck services, you are using the most secure, cost-efficient way to pay an entity or to make a payment for good and services by directly transferring funds from your bank account.
Understanding the relationship between ACH and eChecks
An eCheck is one type of electronic funds transfer that used the ACH network to process the payment. Funds are electronically withdrawn from a payer’s account, sent via the ACH network and to the payee’s bank, and then the money is electronically deposited into the payee’s account.
Since e-checks and ACH payments are electronic, they are processed much quicker than traditional paper check or even paying with a credit card. However, unlike credit card payments, a customer’s bank account is not accessed to determine if sufficient funds are available for the transfer. A bank is not obligated to cover an eCheck if there aren’t enough funds available unless you are enrolled in some type of overdraft protection.
The differences between ACH and eChecks
The primary difference between ACH payments and eChecks is the time they take to process and their methods. ACH payments use the batch processing method, which means inter-institution transfers are done in groups. eChecks are generally processed one transaction at a time.
Typically, ACH payments take two to three business days to process. Weekends and holidays can make the process longer. Nevertheless, you can expect the payments to get faster as same- day ACH payments, which started in 2016, continue to expand to other businesses. Though eCheck clearing varies among providers, eCheck funds often are verified in one to two days and the funds are moved from the payer’s account to the payee’s account within three to five days.
With ACH payments, payments are managed using the information associated with your bank. Direct payroll deposits and utility bill or real estate payments are the most commons types of ACH transactions. For example, when you pay your rent to your property manager, you need to provide your bank account number and the bank’s routing number. Whenever a business requests this banking information, it is an ACH payment.
Another distinction between ACH payments and eChecks is the party that gets to keep and send payment information. Specific entities manage ACH and use the banking information that is provided on the enrollment forms submitted to put a one-time or recurring billing in place for whatever account you select.
Find out the five benefits of ACH eCheck services
If you want to enhance your business, then implementing ACH eCheck services are a good start. In addition to allowing you to easily bring more efficiency and transparency to the bill paying experience for your customers, they provide these advantages:
- Cash flow gets better – When using electronic payments, you eliminate the long wait of resolving paper check and credit card payments. Instead payments can be seen almost immediately because the payments are being transferred from bank accounts.
- Transaction costs are cheaper – Credit card processing is more expensive because ACH processing doesn’t need funds to bypass card networks, like Visa and MasterCard, their interchanges, and their fees.
- Fewer security risks – Electronic processing uses state-of the art technology and security measures. Additionally, ACH payments can’t get lost in the mail and they don’t need to be handled by multiple entities. All of these factors, make electronic payments safer.
- More time is saved – You and your customers will appreciate the convenience of ACH processing. Customers can choose to make a one-time payment or arrange for recurring billing. You will no longer have to worry about sending out paper invoices, keeping paper records, and taking checks to banks.
In addition to offering greater processing, security, and speed efficiency, ACH eCheck services leverage the banking industry’s paper check payments system that is based on a solid legal infrastructure, as well as long-established business practices. These services also are perfect for even small or mid-sized businesses, which often have fewer options in terms of electronic processing. The beauty of these services is that they allow any bank customer that has a checking account to take advantage of them.
The cost of doing business
The average cost of an ACH transaction is about $0.11 each, according to NACHA, which is the organization that manages and governs the financial institutions that fund the efforts. Most times, those with higher transaction volumes pay less. However, the charges really depend on the processor. Some only charge a fee for each transaction, while others also charge a monthly fee or keep a percentage of each transaction.
With so many payment solutions and merchant account service providers, you can get overwhelmed with too many choices. ACH eCheck services are something you should consider if you want a payment instrument that is safe, secure, and efficient.
If you are interested in learning more about ACH eCheck services, contact First American Merchant (FAM). We are a trusted, reliable payment solutions provider that specializes in working with high-risk businesses.