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ACH vs. Credit Card Transactions

May 2, 2022 • by shall

Consumers should have the option of paying using their preferred payment methods. ACH transactions offer enhanced payment flexibility.

What is an ACH transaction?

ACH transactions occur between two banks or institutions through the ACH network. The National Automated Clearing House Association governs the network. Consumers can pay using:

  • Checks
  • Checking account
  • Electronic check
  • Savings account  

What is ACH debit? How is it different from ACH credit?

ACH transactions can be debit or credit. 

  • What is an ACH debit? A debit is often used for subscriptions, allowing businesses to debit a bank on a recurring basis automatically.
  • What is an ACH credit? ACH credits occur when the consumer sets up a payment for a bill, such as supplying a check to the cashier to pay a bill.

What are the benefits of ACH?

ACH offers consumers more payment options, and there are benefits to businesses, including:

  • Lower cost compared to credit cards
  • Improve sales
  • Faster processing time
  • Enhance security 
  • Recurring billing options
  • Improve the user experience
  • Lower churn rate of 14 years compared to three years for credit cards

Businesses and consumers both benefit from ACH payment options.

How is an ACH transaction different from a credit card transaction?

ACH transactions are a request for funds, while credit card transactions are verified immediately if it’s within the customer’s limit. Transactions through ACH are often:

  • Batched together
  • Processed once per day

It can take several days to settle an ACH. Two reasons for an ACH transaction rejection are an account closure or insufficient funds.

Which is better for a small business like ours?

ACH transactions offer lower fees, just $0.30 for each transaction versus 2.5% or higher for credit card transactions. Ideally, businesses will offer both credit and ACH payment options. From a fee standpoint, ACH payments are best and allow you to keep more money in your business.

If your business accepts recurring payments for a product or service, ACH is the optimal choice.

How can I get my customers to pay with ACH?

You can encourage customers to pay with ACH and save your business processing fees by:

  • Offering discounts on transactions. Many gas stations offer customers discounts on each gallon of gas if they shop using their bank account.
  • Provide one-time bonuses, such as a store credit or bonus, to encourage customers to use ACH.
  • Create rewards programs to promote the use of ACH payments.

Monetary incentives and reward programs are often enough to encourage customers to begin making ACH payments.

Are there any problems with ACH?

ACH fraud does occur even if NACHA guidelines are followed precisely. One main issue for businesses is that it can take several days before the merchant receives a rejected payment through the ACH network.

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