Accepting payments can be as challenging as it is necessary. Why? Because payment processing is an expense that can take a big bite out of a business’ profits if you’re not careful.
Fortunately, accepting ACH payments provides a more affordable option than processing only credit and debit card payments. ACH has become a popular method of payment, particularly for subscription-based goods/services and recurring bills.
ACH has taken off recently and now over $43 trillion moves across the ACH network annually.
Are you considering ACH acceptance for your business? Let’s go over the basics so you can make an informed decision about payments.
Short for Automated Clearing House, the ACH network was developed as an electronic replacement for paper checks. That’s why ACH payments are often referred to as eChecks.
The same information you would need to pay by check — a bank account number and routing number — are used to initiate an ACH payment. It’s simply an electronic payment that debits funds from one account and deposits them into another.
Payments travel across the ACH network via an intermediary payment processor that batches and routes funds appropriately. One of the most common uses for ACH is handling payroll for those receiving direct deposit.
Benefits of ACH
There are plenty of reasons why merchants have integrated ACH into their payment solutions set. Some of the benefits you might enjoy include:
- Low transaction fees: ACH payments bypass card networks, meaning they skip interchange and assessment fees. Where card payments may have approximately a 2% transaction fee, ACH payments generally have only a flat fee between 25 and 75 cents per transaction. This can lead to big savings, especially if your business has a high volume of transactions.
- Ease of use: ACH eliminates the need for mailing and manually depositing paper checks, saving time, money, and labor. Each ACH transaction leaves behind a digital bank record, simplifying the processes of accounting and reporting.
- Recurring billing made easy: Many customers are happy to use ACH as a set-it-and-forget-it solution for paying recurring bills like mortgages and utilities, guaranteeing that they never miss a payment. This can help your retention rates, particularly for subscription-based businesses.
Essentially, ACH provides another method of payment that simplifies how money is sent and received. So how does your business get set up to begin taking ACH payments?
Accepting ACH payments
Many payment processors are able to integrate ACH into your payment solutions set, particularly those that provide all-in-one services. Once set up, you should be able to accept ACH payments in-person via a check scanner, by phone via manually keyed in account information, or online via a checkout or billing platform.
When choosing an ACH processing service, you should look for a few things such as:
- Account verification: Services that verify bank accounts are open and contain sufficient funds at the point-of-capture help prevent NSF issues and other potential errors when accepting an ACH payment.
- Price: Payment processors each have unique pricing structures for their services. While ACH processing fees are generally lower than card processing fees, you’ll still want to ensure you’re getting a good deal by comparing prices among various services.
- Other payment methods: The growing popularity of ACH makes it a good payment method for many merchants to offer. However, it should not replace other payment methods. Selecting a payment processor that provides a variety of payment methods allows your business to appeal to more customers.
To sum up, ACH is a smart payment option for many merchants, particularly those that offer recurring billing for products/services or big ticket items. Does your business use ACH payments? What has been your experience?