What is an ACH payment?

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What is an ACH payment?


ACH stands for Automated Clearing House.

In laymen's terminology, it's an electronic network for handling electronic banking transactions. Quite simply, any entity whether a business government entity, organization, or individual can utilize the ACH network to electronically send or receive funds through.

ACH Vs Credit Card

ACH transactions operate differently than credit cards. Credit cards have an authorization component that lets the biller know in real-time that the payment is good.

The ACH world operates in a batch environment and it can be 24 -72 hours before an issue or payment is known. 

There is also a major difference in cost. Credit cards may cost a business 2-3% of the transaction amount, whereby ACH is typically a flat 25-50 cent fee. This can add up.

Coupled with much higher decline rates with credit cards ACH payments are a great option for recurring billing.

Subscription-based businesses are huge beneficiaries of participating in the ACH network. Today's tool set up allows them to connect directly with an ACH processor via API and automate the entire process for recurring receivable transactions, never having to wonder about payments showing up on time.

Comments

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