Electronic check, also called ACH or eCheck ACH, is a popular way for small businesses to offer customers a convenient, easy way to pay for goods and services. Paper checks are less popular in today’s digital world.
However, people still hold their money in bank accounts, use direct deposit, and pay using electronic checks.
The way these checks work is very similar to how a regular check works:
- Automated Clearing House (ACH) authorizes the transaction
- Direct debit goes from the consumer’s account to the merchant’s bank account
Payment processors help facilitate the payment, which is often seen as faster, more secure, and easier for the buyer.
Merchants that are considering using eChecks of any kind should know the answers to these frequently asked questions (FAQS).
6 Top ACH USD / Electronic Check FAQs
1. eCheck vs. Paper Checks
Accepting paper checks is different from eChecks. Consumers are writing fewer paper checks because convenience remains a top priority for consumers. For example, fewer people are going to a retailer and handing over a paper check.
When an eCheck is used, it offers numerous benefits:
- Less time to deposit the money – no physical check to bring to the bank
- Quicker processing times
- Digital checks speed up the checkout process
Electronic checks also offer a higher level of security than paper checks. Many consumers will hand over a paper check before the money is deposited into their bank accounts, but you cannot do this with eChecks.
2. Aren’t eChecks and Credit Card Payments the Same?
Since an eCheck occurs digitally, it’s easy to assume that they’re the same as using a credit or debit card. However, the main difference is that credit card transactions must be processed through card networks.
The ACH handles eCheck processing, so the fees are lower.
Typically, the fees associated with ACH are:
- Flat fee
- Monthly fee
- Batch fees
- Per transaction fees
Depending on the volume of transactions processed, costs for each transaction can be as little as $0.29.
3. eChecks vs. EFT vs. Wire Transfer
Many new merchants question the difference between these three main forms of payment:
- Electronic checks
- Electronic funds transfer (EFTs)
- Wire transfer
An EFT is truly any form of electronic payment. Due to its broad usage, it can mean anything from an electronic check to direct deposit, using an e-wallet or something similar.
In essence, an eCheck is a form of an EFT, but not all EFTs are electronic checks or ACH. Wire transfers work in a similar way to how checks work. Funds are transferred from one account to another. However, one of the main differentiating factors is that a wire transfer can only happen one at a time rather than in batches.
ACH transfers are conducted in batches to help save on processing time and resources.
Due to the single processing of a wire transfer, the fees are higher than an ACH transaction.
4. How are eChecks Processed?
Merchants that want to accept an eCheck ACH must obtain the following information from the buyer:
- Checking account number
- Bank routing number
While most merchants will accept this form of payment online, consumers are also paying for their goods or services in other ways, such as by phone, where they tell the sales team their banking information.
Once all of the information is obtained, the merchant will then use this information to:
- Communicate with the bank
- Verify that the funds exist
- Initiate a direct debit through ACH
Multiple parties are involved in the transaction process, including the originator, business bank, ACH operator and the customer bank. Of course, a payment processor will work to make the entire process as easy and straightforward as possible for all parties involved.
Traditionally, the National Automated Clearinghouse Association (NACHA) oversees the processing of all ACH payments. A regular eCheck is processed in a few days.
Processing is fast, and there are now same-day transactions.
Same-day transactions are also on the rise, rising 37% between Q2 2019 and Q2 2020. A same-day transaction empowers merchants by allowing them to receive payments rapidly so that they can use the funds for other purposes.
5. Should My Business Accept Electronic Checks?
Yes. Customers want more options when buying goods and services. However, there are some industries where eChecks are more common than others, such as:
- Subscription services, such as streaming services or any service where the item is purchased repeatedly. Since bank account numbers do not change often, an eCheck is a good option for payment.
- Online businesses, which must cater to online buyers who want numerous payment options, such as e-wallets, eChecks and digital currencies.
- Large-value good purchases, which benefit greatly from using an eCheck because it can save on fees when compared to credit cards or other forms of payment.
While there’s no requirement for accepting checks of any kind, it’s a good option for businesses that fall into the categories above.
6. How Do I Begin Accepting eChecks?
Working with a payment processor that offers a payment gateway that works with the ACH is key when accepting this form of payment. However, the way in which you accept payment will dictate whether you need special hardware or software to accept the payment.
For example, if you deal with customers face-to-face, you’ll benefit from a check scanner that will make the process as simple as possible.
However, online payments will also require a platform that is designed to communicate between all parties to ensure that the transaction is verified and processed successfully.
ACH network growth rose to over 26.79 billion total payments in 2020. In total, over $61.8 trillion was transferred in the same year. Consumers are opting to use this form of payment more for both Internet payments and when paying consumer bills.
The growth in ACH payments, both electronic and non-electronic, is expected to continue through 2022 and beyond.
Electronic check, or eCheck ACH, is rising in popularity. Funds are transferred rapidly to a merchant’s bank account, while transaction fees are often lower than competing payment methods.