Editor’s Note: This post was originally published in August 2011 and has been completely revamped and updated for accuracy and comprehensiveness.
Get Paid Faster & Save on Fees with ACH Processing
Everyone knows that you can make payments by credit card, cash or check, but what are ACH payments? An ACH (or Automated Clearing House) transaction is the process of accepting payments by moving funds electronically from one bank account to another through a unique routing number, also found at the bottom of a paper check. If you pay your employees by direct deposit, ACH is already in your life.
So, why should you provide this payment option to your customers? Here are 7 great reasons:
1. Lower Transaction Fees!
ACH transactions typically have the lowest fees of any payment method – except for cash, of course. For a $500 transaction, you can expect the following fees across payment types:
- ACH Cost: $0.55
- Paper Check Cost: $1.22
- Credit Card*: $9.60 (1.9% fee x $500 transaction + $0.10 transaction fee)
That’s just for ONE payment. As your business scales, the fees can really add up!
2. It’s More Convenient – For you and for your customers
Accept payments effortlessly and say goodbye to paper invoices, paper checks and trips to the bank. What will you do with all the extra time? At the same time, your customers will enjoy increased flexibility – no searching for checkbooks or remembering it’s time to pay a monthly bill.
3. Set It and Forget It
With ACH payments, you can do just that by setting up recurring billing. As long as your customer has authorized the billing schedule, you can use a payment processing program, such as PaySimple, to automatically invoice your customer. Auto invoicing, payment and payment tracking; can it get any easier?
4. You Get Preferred Funding
All checking account transactions are not created equal. While each bank has its own policy on paper checks and electronic ACH transactions, a bank will generally process electronic payments first. Let’s say that your customer has $1,500 in the checking account. If you process an $800 ACH payment on the same day that someone else tries to cash an $800 paper check, you are the one that gets paid. The other person? They get a bounced check.
5. You’re More Likely to Get Paid, and Paid Faster
ACH transactions can only be disputed for 3 reasons: It was not for the exact amount authorized, it was processed earlier than the authorized date, or it was not authorized at all. On the other hand, credit cards can be disputed for a wider variety of reasons. With ACH payments, you receive immediate failure notification, which takes the wondering out of if and when you will get paid. An ACH transaction also generally means quicker access to funds. Since credit cards do have a higher rate of non-payment, banks will sometimes hold up the funds for days or weeks.
6. It’s More Secure
It’s no secret that identity theft is a concern for you and your clients. You may have customers who instinctually feel uncomfortable providing a bank account number. However, when customers provide the information required to make an ACH payment, it is entered into a secure system and encrypted. When sending a paper check, customers provide the same information required for an ACH payment. The difference is that paper checks exchange multiple hands in processing and run the risk of being left out in an unsecure area – something that doesn’t happen when transferred electronically.
7. Go Green!
No paper checks = less paper. When you factor in paper invoices, postage and transportation, it’s a no brainer. Going green is good for the environment, and for your wallet.
*Credit Card Rates: http://www.cardfellow.com/blog/average-fees-for-credit-card-processing/