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What is ACH processing?
Automated Clearing House processing, also known as ACH Processing, is a payment processing vehicle used to transmit payment transactions from one bank account to another electronically. This is also referred to as direct deposit and has a multitude of uses from one-time payments to recurring payments for business to consumer transactions, business to business transactions, or internal transactions such as employee salary payments. ACH processing is widely used and is known for being a safe and reliable form of payment acceptance. The idea of ACH processing in its simplest form is that payment is direct meaning that whether it is a direct deposit or a direct payment; it goes from one bank account to another bank account in a seamless, automated process that is authenticated by the user and verified by the automated clearing house which is governed by NACHA rule. And, NACHA rule allows for next day same to next day settlements in most instances, but no later than two days from the date of transaction.
How does it work?
In most cases, the information provided by the end-user in order to initiate an ACH transaction is intimate knowledge which virtually eliminates the potential for fraud as compared to fraud occurring from credit card processing. The ease of automation more or less makes the biggest task in ACH processing remembering to batch out so that the transactions are able to run through the automated Clearing House and settle to the assigned bank account in a timely fashion.
Although ACH processing is mostly used in traditional manners such as bill payments for cars, insurance, rents, utilities, or other recurring billing transactions as well as for paying employees; it is also available to high-risk merchants selling high-risk products or services for subscriptions, memberships, recurring billing models.
Is ACH payment processing for High-Risk Businesses?
First, let’s clarify the meaning of the high-risk ACH payment processing services. Some merchant account providers will advertise High-Risk ACH processing, but it’s not the processing that is high risk; it’s the product, service, or merchant that is in fact high risk. Some high-risk ACH processing merchants are:
- Adult membership sites
- Collections businesses
- Auto discount clubs
- Medical discount clubs
- Recurring billing for high risk products or services
- Membership clubs (in general)
- Discount buying clubs (in general)
How difficult is it to get an ACH Merchant Account?
Getting an ACH processing account is a similar process for applying to a merchant account. Merchants need to provide:
- Complete and signed application
- Articles of incorporation
- Identification (driver license preferred)
- SS4 form (Tax identification certificate)
- Most recent two (2) months of bank statements from account listed on application
- Void check or bank verification letter from the account listed on the application
- Most recent two (2) months of ACH processing statements (if applicable)
- Detailed description of the business model
- Copy of the complete terms and conditions of sale
- Login username & password (if website)
- Sample recording of consumer payment information capture (if MOTO)
Underwriting may require further information or documentation from a merchant at any time during the application process depending on the findings of their risk review and analysis. Regardless of what is requested from you, Painless Processing staff has the knowledge and experience to walk you through the entire ACH processing application process in order to make it as easy and smooth as possible.
How do merchants benefit from ACH?
When merchants use ACH processing in order to make or accept payments there is a multitude of benefits. Some of those benefits are:
- On average, the costs & fees associated with ACH processing are less than those associated with a merchant account.
- Settlements are quick. NACHA rules have adjusted to allow same-day settlements in many circumstances.
- In some cases it eliminates the need for businesses to draft checks and the manpower resources required to keep a record. On the consumer side they don’t have to write out, purchase postage, and mail checks.
- It’s easy to use. The biggest, most important task is to remember to batch out and that is a simple and quick process.
- ACH processing can be set up for recurring billing which means that money can be pulled automatically at set time intervals.
- This is also a good substitute for wire transfers because for small payments you can save a lot of money on fees where a wire can cost 15-45 dollars to initiate and / or receive.
In general, any time you add another form of payment acceptance to a mix of payment options it gives consumers another way to make a purchase. This usually translates to better customer experience and the importance of diversity in the final step of the sales process which is payment acceptance should not be underestimated. Contact Painless Processing today to find out more about how an ACH processing account can benefit your business.
How is it different than a debit card transaction?
Payment Processing Time Frame
A credit or debit card transaction can take 2-5 business days to process. 2 days to 4 days factor depends on credit card type.
Visa and Master card transactions take usually 2 days when American Express cards may take up to 5 days to finalize.
By payment processing time we meant the full transaction, from initial sale payment day to deposit of funds in a merchant bank account.
ACH payment processing time takes about 3-5 days for processing. That includes payment authorization from the buyer, settlement and deposit to merchant bank acc. At the settlement part, the funds from the buyer are verified and still may return for NSF (non-sufficient funds).
There are options to avoid NSF with ACH payments such as check verification or check guarantee additional services. Both options will increase transaction charges.
Note that check payment will also take 3-5 business days to process. But banks will favor ACH payment transactions over paper checks when making funds available for the merchant.
Payment Transaction Fees and Rates
Let’s say your average sale runs at $100. A credit card transaction fee, with a very good (low) processing rate of 2.39% will cost you $2.39 per sale. At the same time, an ACH billing transaction could be a flat $0.60 per sale.
Just to visualize the transaction fee differences: with 50 transactions a day, over one month (31 days):
- Using Credit card payment processing you will pay $3704.50 in transaction fees.
- Using ACH payment Processing you will pay $930 in transaction fees. That’s $2774.50 in savings over one month!
With ACH, you accept more, earn more… easily, securely, painlessly!
We work with all types of businesses and billing models. Our Painless ACH Merchant Account Application will take apporx. 15 minutes and we do our best to process it as soon as possible. We understand how urgent it is.