ACH Payment
Electronic bank-to-bank transfer processed through the Automated Clearing House network.
Definition
ACH (Automated Clearing House) payments are electronic transfers that move money between bank accounts through a centralized network. Unlike wire transfers, ACH payments are batch-processed and typically take 1-3 business days to complete. They're commonly used for payroll, bill payments, and business-to-business transactions.
ACH payments offer significantly lower fees than credit card processing—typically $0.20-$1.50 per transaction versus 2-3% for card payments. This makes them particularly attractive for larger invoice amounts where card processing fees would be substantial. Many businesses prefer ACH for recurring payments like subscriptions or retainers.
Why It Matters
For businesses processing significant invoice volumes, ACH can dramatically reduce payment processing costs. On a $10,000 invoice, credit card fees might be $250-300, while ACH might cost $1-2. Over a year, these savings add up to thousands or tens of thousands of dollars.
ACH payments also provide payment certainty similar to checks but with faster clearing times and less manual handling. Once initiated, ACH transactions are reliable and create automatic bank records for both parties. The main tradeoff is the 1-3 day processing time, which is slower than instant card payments.
Examples
- 1
A B2B supplier offers a 0.5% discount for ACH payment to offset their savings on processing fees.
- 2
A subscription service uses ACH for recurring monthly payments, reducing processing costs by 90% compared to cards.
- 3
A contractor accepts ACH for invoices over $5,000, keeping credit card options for smaller amounts.
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