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ACH vs Credit Card Transactions

Merchant service providers offer multiple forms of collecting payments from customers. However, two of the most common are Automated Clearing House (ACH) and credit cards. Merchants must know the difference between the two before discussing the benefits of ACH vs. credit card payments.


What is an ACH Transaction?

ACH is a broad term that involves electronically exchanging funds between two financial institutions through numerous payment options, such as:

  • Checking account
  • Savings account
  • Checks
  • Electronic checks


An ACH transfer is conducted between two banks. Transactions between these banks occur through the ACH network, which the National Automated Clearing House Association governs.


Types of ACH Transactions


ACH transactions can be one of the following:

  • ACH Credit
  • ACH Debit


When an ACH credit card payment occurs, it’s when a customer decides to set up a payment to pay a bill. For example, the payment may come from the customer’s bank account and will be sent directly to you, the merchant.


The payment, in this case, is a credit.


However, ACH debit also exists and is the go-to option for recurring payments. Through the ACH debit, the bank has the account debited automatically. 

The payments sound very similar to credit card transactions, although the credit transactions occur differently.


What is a Credit Card Transaction?

When a credit card transaction takes place, this is a transaction through the credit network that issued the card. So, for example, when the payment is made, the payment doesn’t take money from your own personal account.

Instead, the credit network will cover the payment.

Cardholders are responsible for repaying this debt as per the terms and conditions found within their credit card agreement.


Should Your Business Accept ACH or Credit Cards?

As a business, it’s vital to offer your consumers the opportunity to pay the way they want. The correct answer here is to accept both ACH and credit cards for your business. Consumers have many payment options and preferences, and catering to as many preferences as possible can help improve customer satisfaction.


Offering a range of payment options is a bonus for customers, so we recommend offering:

  • ACH payments
  • Credit card payments


If you’re still unsure of which payment methods you should accept as a business, consider the following pros and cons below in the ACH vs. credit card transactions section.


ACH vs. Credit Card Transactions

The primary difference between ACH and credit card transactions is the guarantee. 

  • With a credit card transaction, the network verifies whether the customer is within their credit limit. If approved, the funds are guaranteed to the merchant. 
  • With an ACH transaction, there are no guarantees. ACH transactions are more of a request for funds.


ACH transactions are typically batched and processed once per day. It’s not uncommon for an ACH transaction to take several days to settle, and the transaction may ultimately be rejected. 


ACH transactions can be rejected because of:

  • Insufficient funds
  • Account closings


Merchants often don’t know about the rejection until several days later.

Pros and Cons of ACH

If ACH transactions take longer to settle and can ultimately be rejected, why do merchants even accept them? Despite these major drawbacks, there are some advantages to ACH transactions.


ACH transactions have lower fees. In fact, they have the lowest fees of all payment options. Typically, ACH payments will have a fee of about $0.30, whereas credit card payments usually have fees of 2.5%.


ACH also allows merchants to give customers more payment options. The more payment options you offer, the more customers you can serve. 



Of course, the biggest drawbacks of ACH are the lengthy processing time and the lack of a guaranteed payment. 


If a transaction is declined, you may not know about it for several days, and that can have a negative impact on your cash flow.

Pros and Cons of Credit Card Transactions

Credit cards, like ACH, have advantages and disadvantages. 



For merchants, one of the primary benefits of credit card transactions is that the funds are guaranteed. If the network approves the transaction, the merchant will 

receive the funds.


The same can’t be said for ACH transactions.


Additionally, accepting credit card payments allows merchants to appeal to a wider range of customers. Today’s customers are more likely to make payments with a credit or debit card.



One of the biggest drawbacks of accepting credit card payments is the fee. Compared to ACH, credit card fees are much higher. Merchants are also responsible for other fees, including interchange fees and, in some cases, monthly fees from the payment processor.


Fraud, chargebacks and the cost of credit card terminals are other factors that merchants need to consider. 


That said, today’s consumers make payments primarily with credit cards and debit cards. Therefore, not accepting credit card payments can be detrimental to most businesses unless they are in an industry where cash-only makes sense or customers pay via monthly invoices.


ACH vs. credit card payment options should be left up to the consumer. 


Businesses can provide better customer service and cater to customers’ needs by offering a multitude of payment methods.


If your business model includes recurring payments of any kind, ACH will be the optimal choice. However, working with a merchant services provider that offers a wide range of payment options opens up doors to let your customers pay the way they want.

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Christian Woodward

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Customer focused

If we can't beat your current rates, we'll give you $500!*

We happily accept merchants processing any amount. Price guarantee for merchants processing $10,000 or more per month. Free terminals and other promotions depend on processing volume, credit and qualifications.

Customer focused

If we can't beat your current rates, we'll give you $500!*

We happily accept merchants processing any amount. Price guarantee for merchants processing $10,000 or more per month. Free terminals and other promotions depend on processing volume, credit and qualifications.