Learn the Ins and Outs of Setting Up ACH Billing for Your Small Business

If you’re considering setting up ACH billing for your business, there are some important things you should know before beginning the process.

Here, we’ll take you through the top ACH billing facts you should be aware of before taking the leap.

1. ACH billing tends to have lower transaction fees

In most cases, ACH transactions are less expensive for merchants than credit and debit card transactions if the processor is charging a flat transaction fee.

The larger your average ticket, the more the savings.

For example, if your average ticket runs at $50, a credit card transaction fee with a rate of 2.49% can be $1.25. However, an ACH billing transaction can be a flat $0.60. For a $100 transaction, the difference is $2.49 vs. $0.60.

Another added benefit of setting up ACH billing is that you do not have to worry about incurring a non-qualified surcharge on transactions—the flat rate is the flat rate.

Take away:

All of this, of course, depends on the rates that your credit card and ACH processors are charging.  If you’re using a gateway that charges extra per transaction, that cost should be factored in on both sides as well.

So, if based on your average transaction size and rates your providers are offering, the cost ends up being net/net, read on to learn about other factors than can weigh in on your decision.

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2. ACH billing has different processing times

  • A credit card transaction (depending on the card) can take 2-3 days to process.
  • ACH billing takes about 3-5 days processing, but most banks favor ACH transactions over paper checks when making funds available.
ach payment processing time

Check out our guide to understanding ACH and credit card funding time here. 

Take away:

When weighing the benefits of cost-savings and customer convenience, be sure to factor in the processing time. This can make a difference when  forecasting your cash flow.

3. Yes, ACH billing is different than a debit card transaction

This might be obvious to some and confusing to others. They both come out of the customer’s bank account, but the processing form is completely different. From a customers’ perspective, they are providing you with authorization to debit their bank account with a routing and account number instead of swiping or keying in a debit card number.

For you, aside from the processing time and transaction cost difference, you’re dealing with an entirely different partner to process the payment.

Take away:

Unless you have a 3rd party software provider who handles all your customer support, you’ll be dealing with different chargeback policies and you’ll be contacting a different party if any issues arise on the transaction.

4. ACH billing payments can still return for NSF

ACH payments can also return as NSF (non-sufficient funds), even if the transaction initially goes through. Unless you’re set up for check verification or check guarantee (both of which typically include a hefty per transaction charge), your ACH payments can still return NSF.

When processing the transaction on the spot, the system is only checking to see if that account actually exists at that routing number—not if there are funds available for the transaction amount.

Take away:

Consider limiting ACH billing to certain trusted customers if you have experienced a high NSF rate with paper checks or know that your customers have the tendency to have un-reliable payment forms.

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5. ACH transaction fees will be debited separately from your other transaction costs

ACH transactions are processed through a different merchant account and a different provider—meaning that the fees debited for the transaction and/or gateway costs will be separate.

Take away:

Keep this in mind when it comes to keeping your books.

6. ACH billing requires authorization

Similar to any payment form, you must have authorization from your customers:

  • For a check, they would sign the check before sending it to you.
  • For credit cards, they would sign a receipt, swipe their card, or sign a form.
  • For ACH, it is a similar process and is usually acquired by a signed form, or can also be obtained over the phone.

Take away:

When setting up ACH billing, be sure to learn how to authorize your particular types of transactions—as with any customer transaction, it’s important to protect yourself from disputes and potential fraud.

If your business has one-time, recurring, or unique billing schedules, ACH billing is typically flexible enough to suit your needs. Customers can authorize payments for variable amounts, recurring amounts, varying dates, or not to exceed certain amounts.

Download our free payment authorization templates here. 

7. ACH billing has different dispute policies than credit cards

According to NACHA, the organization that oversees the Automated Clearing House (ACH) network rules, there are only three reasons people can dispute ACH charges to their account:

  1. If it was never authorized by the account holder
  2. If it was processed on a date earlier than authorized
  3. If it is for an amount different than authorized

Take away:

Disputing an ACH charge requires that the account holder provide notice to the bank in writing (or the electronic equivalent) that one of those conditions exists. (Note that this is significantly different from credit card transactions where a customer can have a charge reversed simply by claiming that the product or service received was not what they expected.) In this way, ACH billing can protect the merchant a little more from fraudulent consumers.


Now that you know the ins-and-outs of setting up ACH billing, hopefully you feel confident making the right choice for your business.  If you’re interested in learning more, you can find information on obtaining an ACH merchant accounthow ACH works and other info on our website, or on NACHA’s website at www.nacha.org.

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