To run any type of business in this day and age, it’s essential to accept debit and credit card payments. Credit cards are used for almost half of all purchases made. You may think accepting credit cards with your POS system and integrating them into your eCommerce shopping cart fully covers you—it doesn’t.
Actually, there is another payment method you should consider adding as an option for your customers. ACH payments offer faster processing times than other methods and have a same-day clearing option. The ACH Network was responsible for moving 23 billion payments in 2018, a number which is still rising year over year.
What is ACH?
An Automated Clearing House or ACH transaction is a method of accepting payments that electronically move funds from one bank account to another. It uses the unique routing number found on the bottom of a paper check to do this. If you’ve ever had a job that paid you via direct deposit or if you use that method to pay your employees, you are using ACH. There are many reasons to consider adding this payment option for your customers too. Here are six reasons that your business should use ACH:
1. Faster Processing Speed
You get faster access to funds that are routed through the ACH. There is a happy medium when it comes to the settlement time between checks and credit cards. When a customer pays with a check it can take up to six business days to clear. It takes two to three business days for a credit card to settle. ACH settlements take three to four business days.
The National Automated Clearing House Association (NACHA) has also established an operating rule for same-day ACH transfers. The newest Same Day ACH processing window goes into effect in 2021. The new window will move up the Same Day ACH availability by two hours to allow a later processing window.
With the addition of this two-hour window, businesses can be more flexible with payments, improve workflow efficiency, and access their cash faster.
2. Lower Transaction Cost
Payment methods like credit cards and checks have higher processing costs than accepting an ACH payment. Average credit card fees can cost from 2 to 5 percent for each transaction. When you consider printing, postage, and personnel cost, a paper check will cost $3 to $5 per transaction. In typical cases, an ACH payment will cost less than a dollar per transaction. That can add up to huge savings on payment transaction costs for your business.
3. Convenience for Your Customers and Business
Save the hassle of having to cut checks and make your money transfers simple. You no longer have to deal with physical checks as a payer. With payments through the ACH network, your customers get more flexibility to make a one-time payment or set up recurring billing.
Transactions using the ACH network take place between two bank accounts. Credit card processing is much more complicated and involves multiple steps. There is a lot less that can go wrong with ACH payments.
4. Ideal for Recurring Billing
If your business runs a subscription model, then accepting ACH network payments is an ideal solution. This payment method is the most cost-effective and will save you money on transaction fees. It also saves you from spending time trying to contact customers whose cards have expired, resulting in payment failure. ACH payments allow you to set it and forget it.
5. More Likely to Get Paid
Businesses must have a chargeback strategy in place when accepting credit card payments. Getting too many chargebacks could result in higher processing fees or even the loss of their merchant account. The reasons that a customer can dispute a credit card transaction can be for a variety of reasons. But ACH transactions have federal laws which outline that disputes can only occur for three reasons:
- The transaction was not for the exact amount which was authorized.
- It was processed earlier than the authorized date.
- It was not authorized at all.
6. Secure Payment Method
Many consumers have concerns about using checks because they are vulnerable to being misplaced or the risk of forgery. ACH payments are entered into a secure system and encrypted. It’s the same information that’s required when a customer issues a paper check. However, with a paper check, this information sees multiple hands while being processed.
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