ACH, or automated clearinghouse, is an electronic payment method that’s easiest to understand when you think of it as the next step in checks. It’s important for merchants to accept credit and debit cards thanks to how many people use them today, but merchants who accept large payments and use their website for business should definitely consider offering ACH as an alternative.
ACH is also known as electronic funds transfers, or EFT. ACH involves banks transferring funds between each other and between accounts, and they collect individual transactions into batches to make them easier to process. This method has a few downsides, but it also has some important benefits.
The Pros
- Security. As an electronic transfer between two banks, ACH transactions are as secure as paper checks.
- Convenience. Unlike paper checks, you don’t have to collect them up from your customers and clients and bring them to your bank for processing. The processing turnover might not be immediate, but you won’t have to worry about doing any processing once your customer pays you through ACH. For that matter, you can use a special check reader to convert paper checks into eChecks, another name for ACH payments.
- Low fees. ACH involves direct funds transfers and has as few middlemen as possible. As such, transaction fees are lower than credit or debit transfers.
The Cons
- Delayed results. ACH processing waits for batches to fill up before processing them, which means you might not know right away whether the customer actually has the funds to buy your product or service. This is similar to the way paper checks can bounce, but credit, debit, and cash payments all let you know right away whether the transaction can go through.
That con is the biggest reason why merchants who don’t accept checks these days also tend not to accept ACH payments. However, merchants and service professionals who send out bills, including utility companies, plumbers, electricians, pest control experts, and apartment renters, can all benefit from sending bills electronically and accepting payments online.
ACH shouldn’t be the only way you accept payment, if only because so many people rely on their credit cards and plenty of Americans still hand out paper checks when they pay their bills. However, making ACH an option can make your life a little easier and is definitely one of the cheapest ways to process payments.
