For just about any business to survive in today’s highly competitive, global marketplace, online payment systems are a must. Today, most businesses offer credit card payments as one option for purchases. But as convenient as credit cards may be for consumers, they’re not without their downsides for businesses.
First, credit card processing can be costly, especially for businesses with limited budgets. And second, by limiting your online payment options to credit cards only, you lose out on a surprisingly large share of consumers who avoid “plastic cash,” preferring instead to pay directly from their bank accounts.
Bank purchases usually rely on ACH transactions — and for many years, businesses avoided added ACH as an option, simple because they either didn’t fully understand the ACH process or they were concerned about delays in payment processing. Fortunately, a lot has changed with ACH transactions, making them a much more attractive option.
Here’s what you should know about ACH processing time — and why your business should give them a second look. Payline’s ACH payment processing revolutionizes how you manage your ACH payments through lower fees, payment reassurance, and more.
What Are ACH Transactions?
ACH stands for automated clearing house, an electronic system that lets consumers and businesses perform bank-to-bank transactions to both send and receive funds. ACH transactions are overseen by the National Automated Clearing House Association (NACHA). In 2019, NACHA processed 24.7 billion ACH transactions, making the Automated Clearing House one of the country’s biggest banking systems.
An ACH transaction can be either a “push” or a “pull.”
- An ACH push occurs when the fund transfer is initiated by the account holder — in this case, the person or business making the purchase. Funds are pushed by the account holder from their bank account to the business’s bank or payment processing system. ACH push transactions are sometimes referred to as ACH credit transactions.
- An ACH pull occurs when the fund transfer is initiated by the person or business receiving the funds. “Automatic” billing for monthly deliveries or subscriptions is a good example of an ACH pull. Every month on a specified date, the payment processing system automatically pulls the funds from the customer’s account using an ACH pull transaction. ACH pull transactions are sometimes called ACH debit transactions.
It’s not just “traditional” banks that use ACH transactions to transfer funds. Money apps like PayPalTM, VenmoTM and ZelleTM also use the ACH network to move money, and many employers and government agencies use ACH for direct deposits of paychecks and benefits.
Most online bill payments use the ACH network, as well. Banks that use the Automated Clearing House Network pay an annual fee, as well as a per-transaction fee. These fees support the administrative costs associated with running the network and processing and moving payments.
Working with Payline, your fees are actually lower than standard credit card fees. Typically, it costs less than 10 cents with our ACH processing network contrasted to a dollar on average when using paper checks. This allows for faster processing and money saved.
ACH Processing Time: How Long Does It Take?
ACH processes transactions in bulk. Three times every business day, the network processes transactions that have come into the network. ACH credit transactions — or “push” transactions — typically are processed either the same day or within one or two business days. ACH debit transactions or “pulls” must be processed by the next business day.
These transfer times are established by NACHA, and processing only occurs on banking business days. The receiving bank may also decide to hold the funds for a day or more, which means even though ACH processing is complete, it can still take a little time before the funds become available.
Understanding ACH processing time can help your business plan its cash flow more accurately. That’s an especially important consideration for businesses that operate on very thin margins and any business with limited cash reserves. Combine this with Payline’s custom payment solutions, you can build trust and convert customers faster by giving them customized options for payment.
When the network was formed back in the 1970s, payments took several days to clear. Since then, advances in technology have shortened processing times considerably. In 2018, NACHA introduced a same-day processing option for many types of ACH transactions. According to NACHA, both credits and debits are eligible for same-day processing.
The only exceptions are international transactions called IATs and transactions that exceed $25,000. Same-day processing is often used for business-to-business payments, same-day payroll deposits and expedited bill payments. Not all banks offer the same-day processing option. Banks that do offer same-day funds availability may charge a fee to expedite the process.
Benefits of Accepting ACH Transactions
Whether they’re one-time ACH credits or ongoing ACH debits, ACH purchase transactions can be a less costly alternative to credit card processing through a merchant account, but depending on the policies of the banks involved in an ACH transaction, you might have to wait longer before the donated funds become available to you.
ACH transactions also provide an option for customers who prefer not to use credit cards, but who want the convenience of shopping online. Considering so many consumers pay bills using some sort of online payment system, offering ACH as an option for customers is a good way to build-in convenience and attract a larger share of customers (not to mention increased revenue).
Adding ACH as a payment option might sound like a lot of work, and it does require time and resources to set up the system and maintain it. The good news is, online payment processors make it easy to accept credit card payments and ACH transactions, with no additional effort by your employees.
If your business is interested in accepting multiple types of payments, visit our ACH Solutions page. You’ll discover more about why Payline’s ACH solutions are world class when it comes to convenience, speed, and security.