How to Accept ACH Payments

What is ACH, and why is it important?

ACH stands for Automated Clearing House. It’s a centralized payment processing network used by banks, credit unions, and other institutions to send and receive money. ACH is administered by the National Automated Clearing House Association (NACHA), an independent organization owned by its member institutions (banks, credit unions and payment processors).

Setting up ACH payments is easy. If you have a business checking account, you can already accept ACH payments through your bank. Alternatively, you can register with a third-party payment processor (TPPP) to accept payments faster in exchange for a small fee.

Accepting ACH payments is beneficial because it’s an economical way to process customer payments, particularly if you routinely serve other businesses or create invoices frequently for client payments. If your business is a retail store that handles many cash and credit card transactions, ACH may not help you. However, if you run a service business, serve other small businesses or regularly accept recurring payments, then offering ACH as a payment method may be a great step.

ACH payments vs. wire transfers

ACH payments and wire transfers have some key differences:

• Wire transfers: Wire transfers are electronic payments between banks and other financial institutions. They are processed overnight and routed through the Federal Reserve Wire Network (Fedwire), the federal regulator for banks chartered in the United States. Wires are settled at the end of each business day, and funds become available in recipients’ accounts immediately. Many banks charge fees for both incoming and outgoing wire transfers.
• ACH payments: ACH payments are conducted through a centralized network administered by NACHA. When done via a TPPP, ACH payments can be processed quickly (within a day or two). However, when processed through retail banks, it takes three to 10 days for funds to become available, depending on bank policy.

Functionally, wire transfers and ACH payments processed through banks are very similar. However, ACH payments made through a third-party processor are much cheaper and more convenient than wire transfers.

How do ACH payments work?

ACH payments are electronic transfers sent through a bank, credit union or TPPP (often a credit card processor). You can also use ACH to pull funds from a customer if they provide their payment account details.

Things work a little differently depending on how you process your ACH payments:

• ACH payments via a bank account: When a business wants to accept occasional ACH payments from customers, it will likely use its business bank account. The business will provide its account details to the customer, who initiates the payment and pays a small fee. Accepting ACH payments via a bank or credit union is sometimes free; however, it may incur a fee of $5 to $15 per incoming transaction. Payments also typically take longer to post to your account.
• ACH payments via a TPPP: If a business plans to accept frequent ACH payments or wants to facilitate recurring payments for customers, using a third-party payment processor makes sense. The TPPP will charge a small fee, similar to when you accept credit card payments. When you use a TPPP, your funds will likely be available faster, but you’ll pay a flat fee of $.20 to $1.50 per transaction plus 0.5 to 1.5 percent of the transaction’s value (similar to credit card processing fees). You may also incur a monthly fee of $5 to $30.

How to accept ACH payments

The simplest way to accept ACH payments is through a bank. Customers initiate the payment on their end, and no further action is required on your part. Accepting ACH payments via a TPPP is a bit more involved. Still, you may end up paying less and accepting payments more efficiently. Here’s how it works:

1. Select a third-party payment processor.

If you already accept credit cards, you may be able to use your credit card processor to accept ACH payments. If you don’t, research third-party payment processors. Find one that makes it easy to accept payments through a point-of-sale system or another payment gateway. Ensure the company charges reasonable fees, forwards payments promptly and has an easy-to-use dashboard to manage your account.

2. Register with your provider.

Once you’ve decided on a payment processing company, you’ll set up your account and ensure ACH payment acceptance functionality. If you’re working with your current credit card processor, you may need to add ACH to your available payment options.

3. Obtain your payment details.

When you’re set up to accept ACH payments, note the payment details for your merchant account. Your payment details are similar to your bank account’s account and routing numbers.

Additionally, you must know how to initiate transactions through your processor to pull funds from your customer’s account. This process is often done through a gateway or dashboard.

4. Share routing details.

The last step in accepting ACH payments is processing transactions. You may need to give customers your account details so they can send you a payment. If you’re using a TPPP, you may be able to take the details of your customer’s account and initiate transactions on your end.

If customers are worried about security, they may be able to enter their payment details via a payment gateway. Your processor will then pull funds from their account into your merchant account.

The best payment processors for ACH transfers

Many of the best credit card processing companies support and accommodate ACH transfers. Here are a few of our favorites:

• Merchant One: This payment processor offers ACH payments among its card-not-present options. In fact, when testing this platform, we found it comparatively easy to key in ACH transfers through our Merchant One secure payment portal. Check out our Merchant One review to see what else this vendor offers in addition to ACH support.
• Stax: All Stax pricing plans include ACH processing features that are fully secure, not to mention quick and easy to use. That said, in our experience, Stax is only cost-effective if your business processes at least $5,000 in monthly transactions. Read our Stax review to learn the types of businesses for which we do and don’t recommend this vendor.
• Helcim: When testing Helcim, we found it easy to accept ACH payments from within this vendor’s virtual terminal. We also liked that you can connect payment links to customer ACH purchases — this feature is rare among TPPPs. Explore this vendor’s ACH and other payment processing options via our Helcim review.
• Square: With this payment processor, customers can pay their invoices via ACH transfer. Better yet, your customers can pay you easily via desktop and mobile devices. Learn more about this leading name in e-commerce and payment processing via our Square credit card processing review.
• National Processing: In our tests of National Processing’s technology, we found that this platform’s interface streamlined our acceptance of ACH payments. We also liked that National Processing includes functionality for taking ACH payments for mail and telephone orders, not just online purchases. Discover how else this vendor powers your customers’ payments via our National Processing review.
• NA Bancard: We tested NA Bancard’s payment processing solutions and found them excellent for reliably and quickly accepting ACH transfers. In particular, NA Bancard made it easy for us to set up recurring, automatic customer ACH payments for product and service subscriptions. Learn more about this payment processor via our NA Bancard review.

Benefits of ACH payments

Accepting ACH payments can bring the following benefits to your business:

• ACH payments are cheaper than wire transfers. Fees for ACH payments are nominal, even if processed through a bank.
• ACH payments are easy to initiate. ACH payments can be pushed or pulled, typically online, without calling your bank or financial institution.
• ACH payments are secure. With the right gateway, ACH offers customers an option to pay without sharing their payment details with your staff. They may even be able to push payments directly from their bank account without disclosing payment details.
• ACH payments allow for convenient scheduling. If you accept ACH payments, you can let clients and customers set up recurring payments.
• ACH payments are easy to set up. If you already accept credit cards, accepting ACH may be as easy as adding the option from your merchant services provider. You may even be able to process transactions directly through your existing POS system.
• ACH payments give customers another convenient payment option. Some customers don’t like paying with debit or credit cards due to the risk of payment fraud. ACH payments are a secure, convenient option, especially for those who send payments regularly.
• ACH payments are convenient for service businesses. If you run a service business that processes few transactions, accepting credit cards may not make sense. However, ACH payments allow you to give clients a way to pay without sending a check or incurring a wire transfer fee.

Disadvantages of ACH payments

While ACH payments offer an extra degree of convenience and flexibility for some, they don’t work for every customer or every business.

• ACH payments are slower than wire transfers. ACH payments process within a day or two, whereas wire transfers settle at the end of each business day.
• ACH payments incur fees. Even if you process ACH payments directly through a TPPP, you will incur fees for accepting these types of electronic payments. Some banks don’t charge fees for incoming ACH payments, but in most cases, you can expect to pay a fee for each ACH transaction you process. If you don’t need your money immediately and can deal with some slight inconveniences, you may prefer clients to pay by check.
• ACH payments take a while to settle. Funds sent by ACH aren’t available for immediate use. It takes several days for funds to become available in your account. Accepting payments through your bank can take three days or longer to access your money. If you regularly invoice clients and need access to funds immediately for your business, consider using a wire transfer instead.
• ACH payments can be revoked. If issues arise with an ACH payment (such as insufficient funds), the transaction may be canceled. If you’ve already committed the funds you believe are headed to your account, you may also be left with insufficient funds.

ACH payments: Increasing cash flow for certain businesses

If your business operates on invoices or offers subscriptions, the comparatively low cost of ACH payments is worth the benefits. For other businesses, the cost may not immediately be as justifiable. However, in an increasingly digital world, ACH customer payments may still be worth implementing. Increasing your customers’ ease of payment is always a smart goal — and ACH payments are just one trustworthy solution.

Max Freedman contributed to this article.