Perhaps a landscaper or an ongoing relationship with that customer where there is a lot of trust involved with the customer base that you are working with and services your business your providing to your clients often you will see ACH used in gym memberships, subscription type of billing situations or environments where the business and the customer have a long standing relationship and where you know who your customer is and they aren’t just walking in off the street.What Is an ACH Payment, and How Does It Work?ĪCH stands for Automated Clearing House, which is a financial network in the United States that’s used for electronic money transfers.ĪCH payments, also known as "direct payments," are a method of electronic funds transfer from one bank account to another without using paper checks, credit or debit card networks, wire transfers, or cash. The benefits of ACH over paper checks or cash are clear as well. 6) A law firm that needs to bill clients periodically for services rendered throughout a billing period.5) A service provider where you want to keep an account.3) A cleaning company that wants to bill against a bank account monthly for their services.2) A landscaper that wants to bill their customer weekly.1) A business to business, commercial relationship where a you need to bill your client on occasion for work you do.Example scenarios where ACH eCheck is great include: You still want the convenience of electronic payments and being able to bill on an ongoing basis (without having to wait for receivables) but are okay giving up the real time nature of swiping a card. Typically this means service based businesses where you have ongoing relationships with your customers. Given the points above, we recommend ACH eCheck processing in situations where you really know your customer and, to put it bluntly, they’re not going to hose you or have the check bounce. Given this, ACH processing services should typically be below 1%. With ACH you are lowering your overall cost of by going direct to the banking network. See post – How Small Businesses Fund their Customer’s Vacations – to understand where that fee goes. Given you’re debiting a bank account directly, you are not going to pay what’s known as “interchange” which is usually the largest part of your credit card transaction fee. All that being said, there are plenty of cases where ACH is very appropriate (see below), and depending on your eCheck provider, ACH processing is typically less than half the cost of credit card processing.ĪCH rates are typically less because you are going through the ACH network and not the credit card or debit card networks. So, if you are selling an expensive piece of merchandise like jewelry, electronics etc you definitely want to utilize the Visa/Mastercard/Discover and American express payment rails to get a real time hold/authorization before letting your new customer walk out with you product or shipping merchandise to them. The transaction will debit the customers account overnight so you’re not actually getting an immediate response like you would with a credit card. With an eCheck/ACH payment, however the response is not immediate. When you run a credit card or debit card it puts an immediate, real time hold on those funds (called an authorization). The big pro for credit cards vs ACH & eCheck processing is that when you enter the account or cc # you get i nstantaneous feedback on whether or not that card is valid and whether you’ll be able to capture that amount of money for your business. In the last blog post we introduced our new Automated Clearing House (ACH) processing service, now we will discuss the differences between ACH & Credit Card Processing.
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