What is ACH? What are ACH Payments?

Enterprise resource management

ACH stands for Automated Clearing House, which is a network of banks that are sending funds between them to pay for products or services. Probably the best known example of an ACH payment would be a payroll check that is delivered to a bank account via direct deposit.

ACH payments were originally started as a system to replace paper checks, which would allow businesses to receive an electronic payment directly from a customer’s verified checking account. The customer is required to supply their bank’s Routing number, as well as their bank account number.

All US banks have a nine-digit Routing Number. If you still use personal checks, your bank’s Routing Number is typically found in the lower left portion of the check. Look for a nine-digit number, to the left of your account number.

If you have ever paid a bill online, you most likely have seen that companies increasingly offer the option to pay directly from your bank account, as well as by credit card.

ACH payments bypass the credit card networks, and therefore bypass the credit card interchange and assessment fees. This is part of why merchant fees on ACH payments are typically far less than on credit card transactions.

Have you ever gone online to pay a bill with a credit card, only to find that if you use the credit card, you will be charged a ‘convenience fee’ by the merchant? True story. I have the option to pay my property taxes online with a credit card. This is great for me, because a large transaction like this will allow me to receive a big amount of reward points from my credit card company. But then I learn that if I use the credit card, the extra fee I will be changed is more than the reward points I would earn. This is a prime example of how much higher credit card fees can sometimes be.

Benefits of offering your customers an ACH payment option:

  • Customer Convenience
  • Additional payment method for customers that prefer not to use credit cards
  • Lower Fees for You!

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