When it comes to accepting online payments, most merchants primarily think of debit and credit card processing. Although these cards are the most common type of online payment method, ACH and checks are still very common in almost all areas of business. The question that we will be answering today is how much are ACH processing fees?
Over 25 billion ACH payments are handled per year by financial institutions, so this method of electronic payments is still something to consider for most merchants dealing in online payments.
However, there are also unique aspects to ACH transactions that merchants need to be aware of when processing these kinds of payments. This includes the various fees and other costs involved that are often different from debit and credit card fees.
Despite all that, there are still many situations where ACH payments make sense for merchants. So below, we’ll go into further detail about ACH payments, how they work, and how to avoid paying more than you have to via fees. We’ll also look at situations where merchants would want to accept ACH payments.
Basics Of ACH Payments
ACH payments are handled via a different network than the credit card and debit card transactions most merchants are familiar with. ACH payments go through what is known as the Automated Clearing House, or ACH, which is where the acronym comes from.
This clearing house is what handles the transfer of requests and payments between the two entities’ bank accounts when performing an ACH payment or transfer. This is also why there is a different fee structure than credit and debit card transactions.
It’s also important to note that an ACH is not the same as an EFT or electronic fund transfer. Instead, an ACH is a type of ETF. ETF is a blanket term that covers a variety of electronic transfers including ACH and wire transfers.
ACH payments facilitate two types of payments. The first is direct payments via ACH. These work similarly to old paper checks but are done electronically through the ACH. They are usually done between two private entities such as a merchant and a customer.
The second is for direct deposit or wire transfers. These are generally for handling payroll, government benefits, or sending money between bank accounts. Merchants dealing with payment processing do not generally deal with the direct deposit aspect of the ACH system.
ACH transfers can be both credit and debit, but this does not refer to card types. Instead, an ACH debit is simply a transfer or “pull” from one bank account to another. A common example of this debit entry would be for recurring payments from a customer to a merchant where the merchant “pulls” the funds on a regular basis from the customer’s checking account.
A credit ACH is a “push” which is generally used for moving money or sending money.
Understanding ACH Transaction Fees And Costs
As with all forms of payment processing, ACH payments do have fees attached to them and it’s important to understand these fees as they relate to other payment methods a merchant may use.
Some of these fees are not readily apparent when merchants first begin processing ACH payments and are sometimes referred to as hidden fees. However, even with the normal fees, ACH transactions are always much cheaper than processing paper checks.
So, how much are ACH fees? Below, we’ll go over all the different fees merchants may face when dealing with ACH transaction costs.
ACH Transaction Fee Basics
Free ACH payment processing doesn’t exist. These services are facilitated by financial institutions and someone has to cover those costs. It’s important to have a good understanding of ACH fee basics when deciding on an ACH processor or dealing with ACH payments and transactions.
Different Types Of ACH Transaction Fees
To begin, there is an ACH cost per transaction known as the processing fee. This fee may be either a flat rate or a percentage depending on various factors related to the merchant.
Flat rates generally run between $.20 – $1.50 per transaction. Percentage rates are generally 0.5% to 1.5%. These rates are for standard processing. However, just as with credit card and debit card processing, high-risk products or transactions will generally have higher fees attached to them.
If you run a high-risk business, contact ECS Payments. We specialize in high-risk processing and can help you process with the best rates for your high-risk transactions.
ACH transactions will require an account fee. This is generally charged by the payment processor and is similar to the fee you may already pay for other electronic payment services and payment gateway access.
Just like with debit and credit cards, your account fees can vary greatly depending on your transaction volume, the level of risk of your transactions, and other factors. It’s important to consider the different services a payment provider may offer in return for different fees.
Account fees generally run anywhere between $10 and $35 per month, although this can vary between merchants and different processors. A lower account fee isn’t necessarily better as it may have reduced services and not offer everything a merchant needs.
The processing fees are the per transaction fee we discussed earlier. These fall under three different categories and depend on the nature of the transaction. Volume or agreements with the payment processor can also affect these fees.
A credit ACH or push transaction will have a fee of $.20 to $1.50 per transaction. This covers the cost of processing through the ACH network and every transaction will have this fee attached.
A debit ACH or pull transaction will generally have the same fee structure of $.20 to $1.50 per transaction. A debit fee may also incur an additional high-risk fee or percentage fee on top of the normal fee.
This relates to the higher fees charged for high-risk processing and is not an actual discount despite the name. Processors need to charge a higher rate for high-risk transactions due to the higher incident of fraud, reversals, or chargebacks. So the higher fees help mitigate this risk.
If you need help with high-risk processing, contact our experts at ECS Payments. We work with high-risk merchants every day to find them the best processing solutions for their high-risk transactions.
Additional ACH Fee Types
There can be other fees involved in ACH transfers. These may not apply to all merchants and some processors may roll these fees into other areas, like the total monthly fee. This is why these are sometimes referred to as “hidden” fees. Although they are not really hidden, it’s just that merchants may not be aware of them before beginning processing.
When merchants run transactions in batches, which is a common practice to maintain efficiency, there is usually a batch fee that goes along with this. These are charged per batch that is run by the merchant. These per-batch fees are generally low and are commonly under $1.
Similar to credit card chargebacks, ACH transactions also have a chargeback fee associated with them. These can range from $5 to $35 depending on the merchant and their relationship with their processor.
Chargeback fees are usually higher than return fees, which we’ll cover next.
ACH Return Fee
This is when an ACH transfer is returned. This is not the result of a dispute and is usually when there was an error or a product was returned. Such errors could be NSF (insufficient funds), wrong account information, closed account, and so on. There are many ACH return codes for transfers that were unsuccessful and you should become familiar with them.
ACH return charges are also lower and generally run between $2 and $5 per return.
For ACH transactions over a certain amount, there may be a high-ticket surcharge. The threshold can vary, but it is commonly for transfers over $5,000.
When first setting up an account to handle ACH transactions, there may be a setup fee involved, similar to how credit and debit card processing usually involves a setup fee for the merchant account.
These are usually a one-time fee and if you’re already setting up your merchant account with a processor, this fee may not be added in separately. So this is a fee that can sometimes be avoided when setting up your merchant services with a payment processor.
Your processor likely already charges a monthly fee, which is an industry-standard practice. There may be additional monthly fees for handling ACH transactions or this fee may be rolled into your already existing monthly fee.
Once again, this is a fee you should be able to avoid if already processing through a company.
Some processors may have a minimum fee if certain thresholds are not met. This means if transaction volumes are too low, there may be an additional fee to cover the difference.
This can be another area where you may be able to avoid this fee if you can work with your processor.
Expedited Processing Fees
One drawback of ACH transfers is that they are not instant like credit or debit card transactions. The standard processing is usually 3 business days for most ACH payments. However, there are expedited options but these include fees for the sender.
There are usually same-day and next-fees, although this can depend on how early in the day the transaction is initiated.
ACH Check Processing vs eChecks
ACH transactions and eChecks (electronic checks) are often thought of to be the same, but they are different and the main difference for merchants is that when a check is presented, it is converted to an ACH transaction using the information on the paper check.
In this way, it is processed as an ACH with all the terms and fees associated with it. So the eCheck process is just a paper check converted at the POS to an ACH transaction
Costs Of ACH Compared To Paper Check Processing
The benefit of converting paper checks to ACH payments or e-checks is mostly the processing fees. Paper checks can have processing fees of several dollars or more per check. Compared to ACH fees that are often $1.50 or less, this presents an immediate cost saving.
Also, ACH transactions are far more streamlined than using paper checks, and the money can be more easily accounted for and put into various accounting software or other bookkeeping programs.
Benefits of ACH Transactions
Although ACH transactions involve fees, there are benefits to using ACH transactions in certain situations.
Speed and efficiency of ACH transactions
Today, wires initiated at the beginning of the day are often completed that same day. If after the cut-off, they will be transferred the next day. For many businesses, this speed is adequate, and combined with the efficiency and ability to run transactions in batches, this can make ACH transactions a good fit.
Security Of ACH Transactions
ACH transactions are also quite secure. The way both push and pull transactions are handled separately adds an extra layer of protection and security for both parties involved. Fraud can obviously happen in any type of financial transaction, but ACH payments are considered very secure by most merchants and banks.
Good For Installments Or Down Payments
One area where ACH transactions are extremely beneficial for merchants is in the area of down payments or installment payments. These are generally larger than the average credit card purchase and happen at regular intervals.
ACH transactions are good for this purpose as they can be set up one time by the merchant and the customer and the money is pulled at the date specified and sent directly to the company’s bank account.
eCheck Vs ACH Vs Check
If a business needs to take paper checks, converting to ACH transactions creates immediate cost savings. ACH and eCheck transactions are far lower than paper checks. The process is also much more streamlined and easier to integrate with your accounting or sales software.
Any merchant that takes paper checks can benefit from ACH transactions and eChecks.
Downsides of ACH Transactions
The downsides of ACH transactions are mostly around the limits that are involved. Depending on the banks and processors involved, there may be ACH process limits, daily limits, and monthly limits that need to be adhered to.
Another downside is the time it takes for approval and settlement. Credit and debit cards can provide instant approval. ACH transactions take at least one day to finalize, and sometimes up to 3 days. So this makes them inconvenient for certain payment scenarios that require instant approval.
How To Minimize ACH Processing Fees and Costs
Below, we’ll go over some tips for negotiating lower transaction fees with banks and payment processors. ACH transactions have significantly lower fees than paper checks, but it’s always best to try to get your overall fee structure as low as possible.
Set Up Your Contract For Success
To begin, it’s best to set up all your payment processing at once. So when setting up your merchant account, you should already know if you may need ACH processing ahead of time, even if you may not need it right now.
This way, you may be able to bundle your services under one monthly fee instead of needing to add on services later at a later date.
Choosing the right payment processor may be the most critical step toward keeping your costs lower when working with ACH transactions. This is especially true if you are dealing with high-risk transactions or other complex payment processing needs.
ECS Payments is a leader in high-risk transactions and we work with merchants all across the country to provide them with the solutions they need with fair fees and incredible service.
Implement Practices to Reduce the Risk of Chargebacks
ACH chargebacks can be another source of high fees that merchants need to be aware of when dealing in ACH transactions. By maintaining good business practices, chargebacks can generally be reduced.
Be willing to work with customers if a dispute occurs instead of letting it go to a chargeback. Also, send a receipt even if the authorization does not require it.
Another tip to reduce chargebacks is to make sure to fully communicate the payment amount and how the charge will appear on the customer’s bank statement. Sometimes customers are simply not aware of what a charge is when they see it on their statement.
Be Aware of Your Limits
One last tip to manage fees is to be aware of your limits when performing ACH transactions. Many fees are tied to limits, either minimum limits or sometimes maximum limits when using the ACH network. This can either be for total dollar amounts or the number of transactions.
Make sure you fully understand your processor’s fee structure so that you don’t go past your limits and unnecessarily incur extra fees. a
Additional ACH Transaction Help To Lower Costs
If you’re a merchant who needs to accept checks or ACH payments and is looking for low-cost ACH processing, contact the specialists at ECS Payments.
ECS is an ACH payment processor that can help your business integrate check processing services and ACH transactions with the lowest costs so you can maximize your margins.
Our team of experts also specializes in high-risk transactions, so if you’re in a high-risk industry, we can help you process the most transactions with the least amount of problems.
Contact ECS Payments today to learn more about ACH transaction processing and the low fees we can offer merchants.