July 25, 2023

Payment Processing

ACH Payment Meaning and Essentials

Payment Processing

Understanding ACH payment meaning is essential to so many businesses. Being able to accept ACH payments from customers is a game changer, and merchants need to understand the realities of the ACH in order to do so. A knowledge base with an effective payment processor is the key to making the most of ACH. 

History of ACH Payments

The Automated Clearing House Network was put into place in the early 1970s to allow banks to transfer funds without needing to use checks, card networks, or wire transfers. Millions of Americans use billions of ACH payments each year on a wide variety of transactions.

Type of ACH Payment Meaning 

ACH payments fall into two broad categories, ACH credit and debit payments. An ACH credit payment means that funds are pushed from a user's bank account into accounts at different banks. With an ACH debit payment, a user authorizes another user or company to pull agreed-upon funds from their bank account. Recurring payments are a great example of ACH debit transactions

ACH Payment Cost and Time

ACH credit transfers can cost around $5 to $10 per transaction, but many banks choose not to charge for this if a payment processor is involved. At the same time, many ACH debit payments are free with most major banks. If you want the payment to speed up, you may need to pay an extra fee. 

Similar to cost, the time an ACH transfer takes depends on whether it is credit or debit. They are only transferred on business days and only about seven times per business day. This means that ACH transfers are often slower than wire transfers. With ACH credit, you can transfer to take place within two business days. With debit payments, they will be processed by the next business day. Rules set at the national level ensure that banks are able to process all types of ACH payments quickly.

Limit on ACH Payment Meaning

Lack of Funds and Account Limits

Suppose there are insufficient funds in the account sending money. In that case, the bank may stop the transfer from occurring or charge the user additional fees. Many banks also restrict how many transfers a user may make in a set time frame or the amount that can be transferred with ACH. Banks will often charge users fees if they exceed their number of transfers for a month. 

Cutoff Times and International Payments

Many banks will restrict or prohibit the use of ACH transfers with bank accounts outside of the US. Additionally, most banks only process transfers during certain hours of the business day. If an ACH payment is initiated after this time, the bank will not process it until the following business day. This could be the next calendar day, but depending on holidays or weekends, this could be several days later. 

Advantages of ACH Payment

There are several essential advantages of ACH payments. First, they are cheap for users and businesses to send and accept. While wire transfers are typically faster but come with higher transaction fees. Another advantage of ACH payments is that they are easy to set up and continue to use, especially for recurring payments. Whether it's a gym membership or a utility bill, ACH makes monthly billing far easier. 

Downsides of ACH

As ACH was developed in the 1970s, it lacks many of the security features of more modern payment options such as credit cards. This has resulted in growing ACH fraud in recent years. Additionally, it can be easier to get away with fraud without a managing body, as with card networks.

Alternatives to ACH

There are several other options available to use aside from ACH. People can use mobile money transfer apps that let users send money with just the recipient's email address or phone number. These apps also transfer money far more quickly than with ACH. Money transfer services such as Western Union are another option. Still, these services do charge a fee, unlike most ACH payments.  

Accepting ACH as a Business

Companies that use ACH Payment

It is common for service companies to charge with ACH rather than using checks or credit cards. These businesses can range from consultants to construction companies. Additionally, it is prevalent for freelancers and contractors to accept ACH payments from companies. 

Businesses that rely on recurring payments or subscriptions also use ACH extensively. ACH payments allow these companies to easily collect payments from customers without having the customer authorize each individual transaction. 

Setting Up ACH Payment

In order to accept ACH transfers from a customer, a business will need to collect the customer's bank account information. Both parties' account numbers and routing numbers will be required to make the transaction possible. If the payment is recurring, the company will need to set up the transfers at the agreed-upon times

Proactive Security

As discussed earlier, ACH has an additional risk of fraud that is not present with other payment options. Companies and the payment processors that they work with must be proactive with their security. Being vigilant and having the best security practices ensures that any company can make the most from accepting ACH payments.

Accepting ACH Payments with Treati

With Treati, we are happy to answer any questions you may have about ACH payment meaning, and you can contact us here. We work to provide you and your customers with as many payment options as possible, including ACH. Our payment processing is designed to be tailored to the needs of your business. To accomplish this, we offer the highest level of security to protect your business from ACH fraud and any payment fraud. 

We also offer high-level customer service to quickly and efficiently address any problems you may have. Treati offers incredibly competitive rates for processing ACH payments. You only have to pay $20 a month and 20 cents per transaction. This, combined with our top-of-the-line security, ensures that you get the most out of ACH transfers. 

Bottom Line

ACH payments are an incredible opportunity for businesses to quickly and efficiently collect funds from their customers. There is a risk of fraud that comes with it. Still, fortunately, with Treati, you can be safe in knowing that we will provide you with the best security and service possible so you can leverage this powerful payment tool.