All About ACH Applications and Why You Should Use Them

ACH applications rising up for business owners, even while the processing time runs slightly slower than credit card transactions. ACH stands for Automated Clearing House. We know it sounds complicated. But believe us, it really is quite simple. In easy terms, ACH is just one of the several means of electronic payments/transactions. They usually take place between two business bank accounts within the country. These transactions are made possible through the reliable network built by the ​​National Automated Clearing House Association, aka NACHA.

However, the key difference that ACH offers is that unlike other modes of electronic transfer, like wire transfers or credit/debit card transfers, it offers more flexibility in specific ways. Let’s discuss the main benefits of using ACH.

Benefits of using ACH

Every electronic payment method has its pros and cons. Here are a few reasons why you should consider ACH over other payment modes.

  • ACH transfers can be stopped more easily than wire transfers: Wire transfers are almost real time. In most cases, the banks process them on the same day. ACH debit transactions can take up to 2 to 3 business days (although they are getting faster with advanced ACH applications and offer same day processing in several cases).

Cancelling wire transfers is exceptionally inconvenient and almost impossible since they are quick. Once the receiving party gets the funds, there is no way you can cancel it. ACH transactions can be stopped more conveniently since the processing itself takes longer.

  • Lower processing fees: ACH payment processing is by far the cheapest electronic mode of payment available on the market. Wire transfers, as well as credit and debit card payments, are significantly costlier compared to ACH transfers.
    • Fee for wire transfers: $10 to $35 for each transaction; additionally, the receiver may also need to pay an additional fee for incoming transactions.
    • Fee for card transactions: 2% to 3% of the net transaction amount.
    • Fee for ACH payments: Flat 25 to 50 cents per transaction.
  • Easy reversals: There is almost no way you can reverse a wire transfer or a credit/debit card transaction after it is complete. However, you can easily submit a request for a reversal in case of an error while processing payments through ACH.

While ACH transfers work for businesses of all sizes, they are more valuable to some users. Let’s see who should ideally use ACH payments as their primary mode of transaction.

Who should use ACH payments?

Wire transfers and card transactions are great for a convenient one-off small purchase. However, you will be better off with an ACH payment to move money in most other cases.

  • Individuals who regularly make big business purchases: The processing fees for a small wire or card transaction are often negligible. However, if you make big purchases, you should prefer using ACH payment processing to avoid unnecessary hefty fees.
  • Business owners who pay their vendors regularly: Business owners who need to make regular payments can set up ACH transfers to run on auto-pilot. That way, they can guarantee a timely payment at scheduled intervals without any human intervention.
  • Institutions making recurring payments: Institutions that need to carry out regular payments (for example, their employees’ salaries) can use ACH payments to their full potential. Instead of processing each transaction individually, ACH transfers usually work in batches. Therefore, processing the payment to the bank accounts of hundreds of individuals is super simple with this tech.
  • Individuals Paying Their Bills Electronically: Most government organizations accept payments through the ACH network. So, you can pay your company’s power and water bills via ACH.

The digital revolution and internet era has brought forth several excellent ACH applications. Let’s see why you should consider using such applications for your business.

Why use Third-Party ACH Applications?

Reliable third-party ACH applications make sending and receiving ACH payments simple. They act as a front-end for your business’s payment page and help you accept eChecks as well as direct transfers effectively. They eliminate the delay caused by paper checks.

You can use these ACH applications to:

  • Provide a seamless payment experience to your clients: The best ACH applications seamlessly integrate with your payments page, thereby reducing friction for your customers while they make their payments.
  • Reduce processing time: These applications rely on the next-gen automated clearing house network to process your payments quickly.
  • Get excellent security: Top ACH applications like com offer an additional data collection and security layer to prevent fraudulent transactions.
  • Leverage detailed reporting features: Some applications also offer advanced analytics and reporting features to help you track and grow your business in an organized fashion.

Although the ACH processing time is not the best, the technology offers several key benefits for businesses that regularly deal with high transaction volumes. Every day, an increasing number of financial institutions and business owners rely on the ACH process to save and transfer money efficiently.

NACHA is also developing state-of-the-art modernization for the technology to prevent fraud and decrease the ACH processing time. With an ever-increasing speed of transactions, ACH will soon act almost similarly to other real time payment solutions.

 

 

By ICG Digital
November 5, 2021
Leave a comment

Want to learn more about iCheckGateway?