ACH payment processing helps your small business process payments quickly and securely, giving you an edge over your competition.
ACH stands for “Automated Clearing House.” Governed by the National Automated Clearing House Association (NACHA), the Automated Clearing House quickly processes each transaction electronically, eliminates the need for a paper check, and costs less than credit card processing.
We field questions every day about how ACH Payment Processing works. We’ve chosen the most common questions to address to help you understand more clearly how ACH processing can have a positive impact on your business compared to other payment solutions.
How does ACH payment processing work?
ACH payments can help your small business with quick and secure electronic payment processing. To keep it simple, ACH payment processing are used to move money directly from one bank account to another (essentially bank transfers). This is in contrast to using card payments, where you will end up dealing with a variety of card networks. The funds move expediently through the ACH network, with the funds deposited into the receiving bank account within a few business days. It moves funds without needing to use a physical check, credit card, or debit card.
ACH payment processing has a number of advantages over credit card transactions for small businesses. For starters, it is particularly helpful for paying recurring bills. Direct payment through ACH can help customers pay for services. They can pay through ACH credit or ACH debit. ACH credit pushes the funds to an account, while ACH debit debits the account. A customer would use ACH debit for recurring bills they want to put on autopay. ACH credit can be utilized for making a one-time payment. Finally, ACH transactions can also be used for online payments.
As for the process itself, there are a number of ways that ACH transactions can work. Consider the scenarios below.
ACH payment processing scenario #1: Transfers between individuals
Let’s say you have a client that wants to send you a one-time payment via ACH. Here’s how the process would typically work.
- The payer initiates an ACH credit via their bank’s online platform. Their bank then acts as the ODFI (originating depository financial institution) by submitting the transaction file into the ACH network.
- The payer provides the necessary payment information, including the receiver’s account number, payment amount, etc.
- The ODFI debits the payer’s bank account.
- The ODFI sends the ACH files to the network, where it is routed to the receiving depository financial institution, or RDFI.
- The RDFI credits the receiver’s account with the amount via direct deposit.
ACH payment processing scenario #2: Using a payment processing platform
If you intend to receive ACH payments on a regular basis (i.e., through recurring payments or a similar setup), you can automate bill payments for your customers through the right payments provider. Here’s how that process would typically work:
- The first step is setting up ACH origination capabilities through your payment processor. With Stax, if you are already processing credit cards on our unified platform, simply contact your account manager to activate ACH—no need for a separate “merchant account” or provider. At Stax, our all-in-one payments platform supports multiple payment methods, including credit and debit cards, ACH, eChecks, and more.
- Request for authorization from your customers. Your customers can authorize ACH transactions by filling out a form (such as a PDF document) or through an online portal. Customers would need to provide the following account information:
- Bank name
- Account type (checking account or savings)
- Account number
- Routing number
- Enter your customers’ payment details into your ACH system.
- Your processor will take care of initiating transactions at the right time.
How can ACH payment processing help my business?
ACH payment processing saves your business time and money by providing automated tracking and predictable settlement times. Since ACH is often free for the payer and significantly lower in cost than wire transfers (which average $25-$45 per transfer), it is the superior choice for managing recurring payments.
1. Better ACH payment processing fees
If you use a traditional credit card processor, you could be paying more through extra processing fees. Interchange rates for each type of credit card vary, but the more cards your business processes through traditional means, the more you’ll pay.
ACH payment processing is less expensive for the business conducting the transaction than paying with a credit card. ACH payment processing is significantly less expensive than card payments because it is a low, flat-fee service rather than a percentage-based charge. With Stax, you pay a low, flat dollar amount per transaction, regardless of the transaction size. This model is exceptionally cost-effective for large invoices. You’ll be able to easily track each incoming payment while saving on processing fees.
2. Easy ACH set-up for customers
You’ll find that many customers prefer ACH payment processing because it’s user-friendly. To use ACH payment processing, all you need is your customer’s banking information. With the one-time entry of their account and routing numbers, your customers can pay your invoices at whichever interval you choose. Each payment will be automatically deducted from their account, making timely payments easy. Customers no longer have to manually pay invoices, reducing your Days Sales Outstanding (DSO). Since ACH is free for the customer, this creates a win-win scenario for automated, on-time payment collection.
3. No more expired credit cards
Unlike credit cards that regularly expire or have the number changed after a suspected fraud attempt, your customers’ bank accounts and routing numbers will likely remain the same for years. This means you won’t have to chase down updated payment information. You’ll save time on manual operations tasks by letting customers set up ACH on their own. That means that companies on a monthly subscription model greatly benefit from accepting ACH payments.
Is ACH processing worth it?
A little math is all it takes to find out if ACH payment processing could help your small business. Determine the cost of accepting ACH payments with your payment provider. Then, add up how much you’re spending on interchange and credit card processing.
How do I get ACH payment processing?
You can access ACH payment processing and all of its benefits through a payment processor. Payment processors facilitate the actual payment and deposit the money directly into your account. Using this (instead of traditional credit card processing) lowers your overall processing costs.
Stax is a subscription-based payment processor that integrates ACH into our unified platform. This model means you pay a low monthly fee and a low, flat-rate transaction fee per ACH transaction, ensuring cost predictability and maximum savings regardless of the payment amount. Whether your customers need one-time payment or recurring billing, Stax can handle all of your payment processing needs. We provide you with the full functionality to accept a variety of payment types. You can easily set up ACH through our virtual terminal or by utilizing Stax’s API for direct system integration. Our platform provides full payment origination capabilities, allowing you to accurately track the status of all your transactions and funds.
Stax customers can contact an account manager and request to turn on ACH payment processing. Customers can also do this by logging into the Stax dashboard and clicking on the Apps section. Find and click the ACH app, and click the Contact button to reach our support team.
FAQs about ACH payment processing
Q: What is ACH payment processing for small businesses?
ACH payment processing allows small businesses to process payments electronically in a quick and secure manner. ACH stands for “Automated Clearing House” and is governed by the National Automated Clearing House Association (NACHA). It eliminates the need for paper checks, is more cost-effective than credit card processing, and can be particularly beneficial for recurring bills.
Q: How does ACH payment processing work?
ACH payment processing enables the transfer of money directly from one bank account to another, bypassing the need for physical checks, credit cards, or debit cards. The process typically involves the payer initiating an ACH transfer from their bank, providing the necessary payment information, debiting the payer’s bank account, and routing the ACH files to the receiver’s bank through the ACH network.
Q: What are the benefits of ACH payment processing for my business?
ACH payment processing can offer numerous advantages to a small business. IACH payment processing is significantly less expensive than card payments because it is a low, flat-fee service rather than a percentage-based charge. With Stax, you pay a low, flat dollar amount per transaction, regardless of the transaction size. This model is exceptionally cost-effective for large invoices. ACH payments are particularly beneficial for businesses that use recurring billing or invoicing.
Q: Is ACH processing worth it for small businesses?
To determine if ACH processing is worth it for your business, you should calculate the cost of accepting ACH payments with your payment provider and compare it with what you’re currently spending on interchange and credit card processing. ACH processing can be less expensive and more efficient, making it a potentially valuable tool for small businesses.
Q: How can I get ACH payment processing for my business?
ACH payment processing can be accessed through a payment processor, such as Stax. These processors facilitate the payment and deposit the money directly into your account. Using ACH processing instead of traditional credit card processing can lower your overall processing costs.
Q: What is the role of a payment processor like Stax in ACH payment processing?
A payment processor like Stax enables you to accept a variety of payment types, including ACH payments. Stax is a subscription-based ACH payment processor where you pay a one-time transaction fee regardless of the transaction size. It allows you to easily set up ACH through a virtual terminal and accurately track your payments.
Q: How can customers set up ACH payment processing?
Customers can set up ACH payment processing by providing their banking information, which includes their account and routing numbers. Payments can then be automatically deducted from their accounts at the intervals chosen by the business. This system eliminates the need for customers to manually pay invoices and doesn’t cost them anything extra.
Q: What is the difference between ACH credit and ACH debit?
ACH credit and ACH debit are two ways customers can pay through ACH. ACH credit pushes the funds to an account, while ACH debit debits the account. A customer would use ACH debit for recurring bills they want to put on autopay, while ACH credit can be utilized for making a one-time payment.
Q: How can ACH processing help with recurring bills?
ACH processing is especially beneficial for recurring bills, as it allows customers to put their bills on autopay. This means that the payment will be automatically deducted from their accounts, making timely payments easy and eliminating the need for manual intervention.
Q: How are ACH payments different from credit card transactions?
Unlike credit card transactions that involve various card networks and may come with higher processing fees, ACH payments move money directly from one bank account to another. ACH payments don’t require a physical check, credit card, or debit card and are generally less costly, making them more cost-effective for small businesses.
