accepting ach payments

NACHA requires merchants to verify customers’ identities prior to processing a transaction. This is important because phone or online ACH transactions only require a name, address, routing number, and account number—and these are readily available on any paper check. Modern ACH payment processing standards can support same-day, next-day and two-day transfers. Depending on when they’re received and submitted for processing, an ACH transfer could take 1-3 days to complete and fully settle into a receiving account.

accepting ach payments

The ACH is run by the National Automated Clearing House Association (Nacha). Accepting payments is just one aspect of running a successful online business. You also have to worry about things like having an attractive web design, hosting your site and growing your audience with effective online marketing. To get a better idea of what you need to step foot into the world of e-commerce, check out our guide to setting up your own online store. You can make it easy for clients to pay for your services by using an invoicing platform that enables one-click payments right from their email. It essentially works the same way as a traditional paper check, except the whole process of issuing, exchanging, and cashing the check takes place online.

How to accept ACH payments at your small business

A split ACH deposit is a type of direct deposit in which an employee can allocate their pay into multiple bank accounts or other financial accounts. This happens when your customer changes financial institutions and forgets to tell you, which can disrupt your recurring billing cycle. When this happens, you’ll have to enter their new bank account details and set up the ACH billing details again. An ACH direct deposit is typically made from a business or governmental agency.

If you pay your bills electronically (instead of writing a check or entering a credit card number) or receive direct deposit from your employer, the ACH network is probably at work. Direct payment is another type of electronic funds transfer through the ACH network. Unlike direct deposits, which come into your account, direct payments are ACH transfers you send out of your account, such as bill payments. accepting ach payments The Automated Clearing House is a centralized US financial network for banks and credit unions to send and receive electronic payments and money transfers. Wire transfers can be sent domestically or internationally, and banks can charge fees for both types of transactions. International wire transfers are typically more expensive, and some banks allow for fee-free incoming domestic wire transfers.

Direct payments

Each month, the insurance company’s bank requests a payment from your bank. Assuming all requirements are met, which includes having sufficient funds in your account, the transaction is processed and completed. This makes it a cost-effective option for law firms looking for low processing fees.

EFT payments (EFT stands for electronic funds transfer) can be used interchangeably with ACH payments. EFT payments have exploded in recent years with the continual growth of online shopping. Approximately eight out of ten people shop online, with a growing number as repetitive online shoppers. With the advancement of smartphones, it’s easier to shop through mobile platforms, adding to the increase in internet-based EFT transactions. If you run a subscription for a publication, an online community or a yoga or fitness studio, look into adding an ACH payment option for your customers. This is often easy if you’re a freelancer, consultant or contractor working with established companies.

The drawbacks of ACH payments

Even with the transaction time of up to 1-2 business days, ACH payments are among the safest transactions. Although there is no mandatory certification program for ACH payments, the National Automated Clearinghouse Association (Nacha) offers voluntary security requirements for all ACH transfers. Nacha administers the operating rules for any private organization, defining the roles and duties of each ACH Network participating, ensuring governance and compliance. Direct payment through ACH is when funds are used to make a payment by either an individual or an organization. For example, when a consumer pays his or her electric or cable bill automatically out of a personal checking account, this is a direct payment. Additionally, when a business pays for services or goods, and the funds are electronically deducted from the operating account, this is also a direct payment.

  • The ACH network processes payments in batches (as opposed to wire transfers, which are processed in real time).
  • In some cases, the ACH transfer can fail because your customer’s payment is rejected by your bank.
  • Receiving ACH payments benefits clients by saving them time and making it easy to pay.
  • In 1978, the Electronic Funds Transfer Act was signed into law by the U.S.
  • With over a decade of editorial experience, Rob Watts breaks down complex topics for small businesses that want to grow and succeed.
  • When it comes to ACH direct deposits, they’re commonly used for employee payroll.

ACH payments are a great alternative to more common options like cards and digital wallets. Some customers may not use these methods, or might prefer to make a direct bank transfer. ACH payments are also ideal if you offer subscription services or need to receive recurring payments. makes it easy to offer a wide variety of payment methods, from common choices like credit cards and digital wallets to convenient alternatives like ACH.

Accepting ACH payments from your customers replaces paper checks with electronic funds transfer. Cash flow and operational processes related to one-time or recurring bill payments are improved since funds are automatically pulled from the customer’s account. Instead, they are processed in batches based on when the transaction is submitted.

accepting ach payments

It’s important to note that a payment refund is not instantaneous like an authorization reversal. This process requires the credited funds to settle and clear, which, on average, can take anywhere from three to 10 business days. ACH payments can be a secure and convenient way to automatically pay your bills, get paid and make money transfers. And if you have experience using P2P payment apps like PayPal or Zelle®, you’re already using ACH payments.