An employee who receives their bi-monthly paycheck via direct deposit from their employer.Here are a few common examples of ACH payments: In other words, ACH payments facilitate the transfer of funds between bank accounts via a centralized clearing system. Here’s how ACH payments work: These electronic transactions allow business owners or their customers to debit funds directly from their respective bank accounts instead of processing a transaction via credit card, paper check, wire transfer, or cash. If, after weighing the pros and cons of both debit and ACH, you may decide to offer both.ACH, or Automated Clearing House, is a direct payment method that can electronically transfer money between banking networks in the United States. It’s especially critical to accept debit card payments if your competitors do so. With debit card transactions, you can give customers the option of receiving cash back on their transaction, allowing them to avoid going to an ATM and paying an ATM fee to withdraw cash.Ĭustomers tend to trust businesses that indicate they accept debit (and credit) cards by displaying a Visa or MasterCard logo. Customers are more likely to use your business when you offer their preferred payment method. The number of debit card payments increased more than any other payment type between 20, according to a 2013 report by the Federal Reserve. However, these services cost an additional fee which can offset the cost savings you get from processing ACH transactions.ĭebit is the most preferred method of payment by consumers today. You can reduce returned payments by enrolling in check verification or check guarantee. You have to spend additional time and money to pursue the customer for payment or suffer the losses. The system simply checks to see if the account exists, not if the customer has enough funds available for the transaction.ĪCH payments can be returned for nonsufficient funds if the customer doesn’t have enough money in their account to cover the transaction or if the account has been closed. With ACH transactions, on the other hand, you don’t get an immediate response about availability of funds. A lost sale is far better than the collection issues that arise from returned payments. If the customer doesn’t have sufficient funds (and hasn’t opted-in to processing overdraft transactions), the transaction will be declined and the customer has to find an alternate payment method or forgo the transaction. When a debit card is swiped, the payment system verifies that the customer has enough funds before approving the transaction. Decreased Risk of Returned Transactionsįor the merchant, payment from debit card transactions is guaranteed.The benefit of faster payments is a healthy cash flow that allows you to easily handle your immediate business needs and regular payment obligations to employees, suppliers, clients and other creditors. Since debit card payments are processed faster than ACH, you’ll be able to use the funds from these transactions much faster. Funds are authorized, verified & transferred from the customer’s account immediately and appear in your merchant account in as little as 48 hours. ACH transactions are processed using a batch and forward system and can take from 4 to 10 days to completely process and for funds to appear in your accountĭebit cards, on the other hand, are processed using a real time system. While processing payments via ACH may be faster than processing a physical paper check, the process is slower than for debit cards. This allows you to avoid the interchange fee charged on debit card transactions. While the specific cost of ACH transactions will vary depending on your merchant account provider, ACH transactions are less expensive than debit card transactions because they bypass the card networks. Accepting ACH payments keeps you from having to take a trip to the bank to deposit checks. The Automated Clearinghouse (ACH) is an electronic payment system that processes payments using the customer’s bank account and routing number. ACH is less expensive, but the increased benefits of accepting debit may be worth the additional cost. While ACH and debit transactions are both funded by the customer’s checking account, the major differences for you, the merchant, are the cost and processing time for these transactions. And debit cards remain a preferred payment method for most consumers, with increased usage each year. The NACHA, the organization who administers and governs the ACH network, says that more than 19.1 billion ACH transactions are processed each year. Among all the payment processing options for merchants, ACH and debit are two of the most popular.
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