|May 18th, 2022
Aren’t at times you confused with ACH and eCheck payments? Unfortunately, there are chances that you may get confusing, especially when you are trying this method for the first time.
Thus, this article given below will surely give you an idea about how fast, flexible, and cost-effective ACH and eCheck payments can be for your business.
So, please read the information mentioned below to know how ACH differs from eCheck payments. Even learn how you can set up quickly.
What is an ACH payment?
ACH is an acronym for Automated Clearing House, which works as the network for electronically moving money between bank accounts across the United States. It is governed by the organization called NACHA (National Automated Clearing House Association).
An ACH payment is classified as an electronic payment sent from one bank to another through the ACH network. This type of transaction is called an EFT called an electronic funds transfer.
ACH payment enables merchants to allow their customers to transfer money directly from their bank accounts. ACH transactions generally include direct deposits, wire transfers, electronic benefits payments, and ACH disbursements.
Since ACH payments are processed through different merchant accounts and payment processing providers, these payments have their chargeback and dispute resolution policies.
What is an eCheck?
An eCheck works like the digital version of the paper check. It uses the ACH network to move funds from one account to another. This is the reason the term ‘eCheck’ and ‘ACH payment’ getting used interchangeably with each other.
1. Set Up An ACH Merchant Account
A merchant account usually allows one to use the ACH network to withdraw payments directly from the customer account. Thus, to open a merchant account, one needs to provide the following information including federal tax ID, the number of years it might take to be in the business, and the estimated processing volume.
2. Request Authorization From Customers
ACH billing usually requires authorization. For an assumption, a customer must authorize the person to cash a paper check by signing it, the merchants must allow customers to make an ACH (eCheck) withdrawal. The merchant can easily do this by signing the contract or order form or by submitting an online payment form.
3. Set Up The Payment Details
The customer can easily submit an online payment form with their checking account and routing number, it might include the payment amount, even if it is a one-time or recurring payment.
4. Submit The Payment Information
When you click ‘save’ or ‘submit’ in your payment processing software, it shall begin with the ACH transaction.
What Are The Benefits of ACH & eCheck Payments?
You would be surprised to know that there is not only, but many set of reasons why so many businesses prefer to accept ACH and eCheck payments.
eCheck services generally come with micro fees as compared to credit cards. They can get processed quickly as compared to other physical checks.
2. Fast & Convenient
eCheck processing is known to be faster as compared to paper check processing. In this process, the funds get deposited into the payer’s account within 3-5 days.
Although credit card payments usually take 2-3 business days to process payments whereas banks are known for delaying credit card funds for days and weeks. This is usually executed by the credit card companies because due to non-payment issues. Thus, it doesn’t always remain the case with eCheck services.
3. Accurate For Recurring Payments
eChecks are labeled to be the most popular way to make recurring payments. They allow merchants to create reliable revenue. In case, if the customer has authorized the billing schedule, the person can use eCheck services to capture the invoice.
4. Provide An Extra Layer of Protection
There are times when a customer disputes a credit card charge, he can claim that the product or service they received may not be what they had expected. But, there are three acceptable reasons for disputing an ACH charge.
1. When it didn’t get authorization from the account holder
2. When it got processed earlier than authorized
3. When it got processed for a different amount of money than for the amount of money it was authorized.
Thus, if a merchant wants to dispute the transaction, the customer must cite one of three reasons for claiming his claim to the bank.
ACH & eCheck Payments Can Overcome Credit Card Processing
ACH & eCheck payments can overcome the credit card processing services. As ACH payments process help in protecting revenue from recurring billing, which is considered a far better option than credit cards.
Thus, most of the time, merchants usually find it difficult to change their bank accounts, which works like a big hassle. Many Americans earn wages that can be directly deposited into their bank accounts. This is why many household bills get directly debited from the bank accounts.
Thus, due to inconvenience linked with changing banks, ACH payments get extremely stable with passing the time. As per the reports revealed by National ACH Processing.com, it is revealed than more than 20% of debit and credit cards get reissued every year. Most of these cards generally get expired, lost, or stolen. Some of them are reissued due to data security breaches.
It takes time and effort to update the card data. Despite the best efforts, one may not be able to obtain updated card data from customers. Thus, it might result in a loss in recurring billing revenue for many customers.
Moreover, payment processing companies find it easy to process payments compared to card payments. Thus, merchants shall have a better chance to deposit a check whenever they want to deposit.
Unlimited recurring billing plans are also included in every ACH merchant account. This is why recurring payments remain uninterrupted until the customer cancels or the payment term gets terminated.
ACH payments help in protecting the cash flow & increase the lifetime value of customers to your business. In addition, they ensure the uninterrupted continuation of services or delivery of products to customers.