ACH payments are a type of electronic transfer regulated by the Automated Clearing House in the USA.
While these days most customers prefer to pay for their online purchases with credit or debit card, some still prefer to pay by check. ACH payments are like an electronic check that is more convenient than paper checks and clears faster.
In fact, ACH payments are sometimes referred to as “eCheck”. You can think of eCheck being the payment while ACH is the process used to make the payment.
Individuals typically use ACH payments to pay bills electronically or pay recurring membership fees. They’re a popular method for making recurring payments in general as they are automated. This means the customer doesn’t have to keep manually paying or authorizing a regular payment.
Most of the major payment gateways can process ACH payments including PayPal, Authorize.net, Stripe, and Braintree.
What is the Difference Between ACH Payments and Direct Deposit?
While direct deposits push money into an account, ACH payments are pulled from an account.
The person making the payment must notify their bank that they are giving permission for the merchant to take payment from their account when it is due.
How to Accept ACH Payments on Your eCommerce Site
To accept ACH payments, you’ll first need to set up an ACH merchant account. To do this you’ll need a federal tax ID and you’ll have to provide the number of years you’ve been in business and the expected volume of payments you will receive.
To make the payment, customers can submit information including the payment amount, their checking account and routing numbers, and the frequency of payments.
Merchants can submit this information manually in their payment processing software or you can use checkout software that is set up to take ACH payments and process them automatically.
If you use a service designed to take ACH payments, bank account details will usually be verified when the customer enters them. This can prevent payment delays due to incorrect account information.
How Long Do ACH Payments Take to Process?
ACH payments are not an instant payment like card payments and usually take around 3 working days or longer to process before the money appears in the recipient’s bank account.
Payments made by ACH are processed automatically but are only processed at certain times. If you make a payment by ACH after the cut-off time set by your bank, your payment will not start processing until the following day.
For this reason, it can take longer than the standard number of days to process the payment.
Just like regular checks, eChecks can “bounce” if there are insufficient funds in the payer’s bank account. Payment processors will confirm that a bank account exists when a user chooses to pay by ACH, but they have no way to know if there’s enough money in the account to cover the payment.