ACH – A Modern Day Payment Solution
July 23, 2022
Pay and get paid: electronically, efficiently, economically, and environmentally sound. ACH transactions are a payment solution, unlike credit card processing, to electronically transfer funds without the need for a card, cash, check or any other form of payment. ACH is a transfer of funds from one bank account to another electronically. Otherwise known as an E-check.
As our mission declares, Electronic Cash Systems (ECS) aim is to be a “One Stop Shop” for all payment and product needs.
There are many payment options out there to choose from in the world of merchant services.
One of our popular product solutions chosen by our merchants today is ACH payment processing.
The Automated Clearing House network (ACH), ECS provides secure, dependable solutions for electronic fund transfers from one bank account to another as an accessible alternative to paper checks and a more cost-effective alternative to credit card processing.
With the convenience of ACH payment processing solutions, you can accomplish the transfer of funds for tasks such as a direct deposit for payroll, recurring payment plans, business-to-business transactions, bill pay, and more.
When to Use ACH
ACH can be used in one of two ways.
You can initiate an electronic funds transfer from your bank account to another bank account or from another bank account to yours.
In other words, you can debit or credit another bank account, in which your bank account would then be used to balance this transfer.
Crediting With ACH Payments
Payroll - Direct deposit
Issuing a refund
Paying your bills to other vendors (electric, rent, internet, etc) can oftentimes be done via ACH, rather than cutting a paper check or paying with a credit card.
Debiting With ACH Payments
Debiting another bank account through ACH payment would be done for the following scenarios:
Initiating a customer transaction
If you are a merchant who takes payment online, otherwise known as e-commerce, or has a money-send or loan type business, or has the flexibility to offer payment options to your customer where a card or physical terminal would not be necessary.
ACH may be a great option for you.
Bill pay and subscriptions
You can easily generate fully-automated recurring payment plans on our virtual terminal. By choosing this option for recurring plans for repeat customers, you will negate manual errors in entering transaction information, clear up free time to focus on other areas of your job, and increase productivity for your employees who may handle payments, payroll, and collections. You can also generate and print client receipts and invoices with ECS’s virtual terminal features.
ACH Features And Benefits
With Electronic Cash System’s ACH processing services and features, you can easily streamline your business and eliminate the hassle that comes with many daily or monthly tasks associated with running a successful operation.
ACH has added benefits such as convenience, cost-effectiveness, security, and reporting ease with tracking and managing payments.
ECS Payments offers additional tools to help you succeed when using these services.
Writing checks is not something you see quite as often these days. That is because, with ACH processing solutions, paper checks are dissolving and are transitioning into e-checks.
ACH provides the convenience of electronically moving funds with the click of a button, rather than ordering a checkbook, writing a check, stuffing an envelope, and delivering to the mailbox.
Choosing to save time and energy on how payments are made, is the direction you should consider heading toward to keep up in today’s society as an up-to-date and modern business.
Using the ACH platform is a wonderful processing solution if you are looking for ease and convenience when it comes to paying your bills, and your employees or setting up recurring bill pay for customers who have monthly payments.
The flexibility and stress-reducing capabilities it offers are no match to manually running debit cards, credit cards, or physical checks every month for the same customer and the same amount. We like to say “Set it and forget it”.
Take the extra tie this gives you to better your business for a more successful tomorrow.
Choosing to accept ACH payments is a more economic alternative to credit card processing or wire transfers.
Because credit card payments go through various credit card networks and issuing banks, there are different fees associated with each transaction, such as interchange rates, discount rates, network fees, processor fees, physical terminal fees, qualifying vs non-qualifying fees, and how the card runs (keyed, swiped or dipped) can also affect your fees!
These different fees will add up to a higher processing cost than that of using ACH for your electronic movement of funds. ACH uses only 1 processing network, which is solely the Automated Clearing House network. Because of this, fees are relatively cost-effective and affordable for merchants.
Because ACH transfers are done all electronically, there is little to no room for theft or fraud on a person’s account. Transactions done through the ACH network cannot be intercepted in its process by criminal activity.
Additionally, because this type of transaction is fully electronic, there is no paper trail of a check and no physical card that can be stolen or lost.
Advanced Reporting Tools
Another option to streamline your business and receive the benefits of ACH processing with our virtual terminal is from our advanced reporting tools.
With our tools, you will have the ability to view and download reports for transaction history, batch history, and settlement history.
You can search any type of transaction by the desired and specific field you need to locate, such as amount, date, account number, account name, successful or unsuccessful transactions, etc.
Our reporting tool also shows a live view of where your transaction is at in the ACH process.
Is the transaction capture successful? Is the batch submitted successfully? Is the settlement successful or did the funds come back returned and unsuccessful?
All these questions can be answered just by logging in and viewing your daily transactions and following along with the transaction history.
How Does ACH Work?
With ACH transactions there are multiple phases before the exchange is complete.
There are three steps during an ACH transaction that you should become familiar with: processing, submitting, and settlement.
At ECS Payments Solutions you can easily process your ACH transactions through our all-inclusive virtual terminal.
All you would need to do is log in, enter your customer’s (end-user) information, such as their name or business name, their bank account and routing numbers (ABA and DDA), the amount you want electronically transferred, and choose if this will be a debit or a credit (depending on what features you’ve signed up for), choose the method or SEC code from the drop-down (typically this will be “PPD”), and click submit!
From here, the payment gateway will validate that you have entered all the necessary information.
If you are missing something, or the wrong SEC code was selected you may receive an error. You will simply need to double-check your work and re-submit.
One thing to keep in mind is when you submit a transaction via ACH, there is no ability to refund, void, reverse, or cancel this transaction.
If you realize you made a mistake, or if the customer wishes to pay using alternative means, you can only correct this submission by submitting a new transaction in the reverse.
For example, if you debit a customer for $100, and then realize they already made their monthly payment, the only way to balance this error would be to issue an additional transaction as a credit to their account for $100.
Once you have completed all your transactions for the day, you can move on to the submission portion of the transaction. In the same virtual terminal, you processed the payment initiation, you can also submit your daily batch to your payment processor who then submits it to the ACH network.
For merchants who are high volume, SFTP file uploading is also an available option we present.
Take note, that there are cut-off times when it comes to submitting any type of batch in the payment processing world, regardless if it is for credit card transactions or ACH transactions.
If you do not submit your batch by the standardized cut-off time, you will not receive funding for your batch until the following day from when you would typically receive your batch.
Once you have submitted your batch successfully, the file must be transferred to your ACH payment processor, who then, through the ACH network sends the file to your customers’ banks who then processes the files, validates the information, authorizes the transaction depending on available funds, any holds on the account, etc.
If the transaction information is valid, and there are appropriate funds in the customer’s account, the bank will then transfer the funds to the ACH processor who will then submit the funds to your merchant bank account.
Because this process has to go through multiple parties and the bank account has to be verified, the settlement may take 3-5 business days. If you are a high-risk merchant, although you may be approved to process with us at US Alliance Group Inc., you may be set up with a 2-day funding delay.
This would be to prevent any cases of crediting a merchant for a transaction, when there may not be available funds in their customer’s bank account. This delay reduces the risk that may be involved with certain transactions between particular parties.
Rejected Or Returned ACH Transactions
If a customer’s bank flags a transaction file as unsuccessful, there will be a return or a reject code attached to the file as it is sent back.
Although the initial processing stage may show as successful, meaning you submitted the information successfully to the gateway, and then the batch was successfully submitted to the ACH processor, the bank may then process the file and determine that there are insufficient funds in the account, or the customer has put a “do not debit” block on the account, or maybe even the account number was entered wrong.
Below is a list of the return or reject codes you may receive if the bank determines the ACH file as unsuccessful.
ACH Return Codes
Depending on the reason for the return or rejection, otherwise known as the “R code” you will need to speak to your customer and or double-check the bank account, routing, and SEC information that was entered for the transaction.
If you mistyped the information you may re-enter and re-submit.
However, if the customer provided the wrong account information, has insufficient funds, or has put a block on the transaction, you will need to reach out to them to resolve the issue.
In The Know About The ACH Network
When it comes to understanding when and how funds will be moved and settled, you must understand how and when the ACH network functions.
The ACH Network, just like most banks and financial institutions, does not settle funding on the weekends and or holidays.
This is due to the Federal Reserve being closed. Because of the weekend and holiday closures, the ACH network will do its best to favor the end user.
The end-user is the person who is the opposite of the initiator of the transaction.
As a merchant, you would typically be initiating the transaction for either crediting an employee for payroll or initiating a debit to a customer’s bank for their bill payment, etc.
This would then make your customer or your employee the end user.
According to NACHA, to favor the end-user during this industry’s off days, if payday, for example, was on the 1st, and this landed on a Saturday, the direct deposit payment via ACH, would occur on the previous Friday.
If a bill payment is due on the 1st, which would also land on this Saturday example, the fund’s transfer, via ACH, would be initiated on the next business day, which would be the following Monday.
What is Nacha
NACHA stands for National Automated Clearing House Association. They develop, administer and oversee the private sector for guidelines, roles, and responsibilities regarding electronic payments and ACH network participants in the United States.
Their goal is to maintain a secure network while safely growing and enhancing the use of ACH transactions, utilizing innovation and collaboration.
At ECS Payments, we are proudly Nacha Certified.
This means we maintain upstanding policies, fair and honest ACH practices, and our compliance and risk programs are first-class.
Credit Card Processing, an Alternative to ACH
Many businesses today have the option to process their transactions through different avenues. One alternative to ACH processing is the most common platform of credit card processing.
Although credit card processing is the most widely practiced form of accepting payments with today’s merchants, credit card processing poses its own differences to ACH.
Fees, time, and convenience are some of the main differences when it comes to comparing ACH with credit card processing.
Should You Sign Up For ACH Payment Solutions?
Accepting ACH payments is a wonderful tool that is widely used in today’s market whether you are using it to pay or get paid. At ECS Payment Solutions, we offer ACH payment solutions to our merchants who may already be using our services for credit card processing or ATM and debit processing.
We want our merchants to be able to utilize all of our services for any of their needs and not have to switch between providers for different services.
We also offer ACH solutions as a stand-alone service as well if this is the best option to run all of your fund transfers for your business.
Although ACH triumphs in being more economical and efficient than alternative payment solutions, one of the downsides of ACH processing is the settlement time.
Meaning, that if you need to be funded immediately, credit card or debit card processing may be a better alternative to meet your needs.
The payment processing solution you choose will ultimately depend on the type of business you have and what the best way to facilitate the movement of funds will be for your personnel and consumers. If you are ready to explore which payment processing solution would be best suited for your business endeavors, USAG is ready to connect with you!