Choosing the right payment methods for your customers can have a significant impact on the success and growth of your business. ACH (Automated Clearing House) and credit card payments are two popular methods, but they are quite different.
Below, I’ll explore the three key differences between these payment types. Understanding these will help you decide on the best payment methods for your business.
What Is an ACH Transaction?
An ACH transaction is a direct, electronic bank-to-bank transfer that is processed through the ACH network. NACHA (National Automated Clearing House Association) is the non-profit group that monitors and regulates all ACH transactions.
ACH transactions are primarily used in the US for B2B payments or recurring payments like utility bills. Customers provide their banking information through your checkout process and then the ACH network draws the funds from their account and deposits them into your merchant account.
What Is a Credit Card Transaction?
Credit card transactions are another type of electronic payment method. Credit card transactions are processed through the corresponding card networks – for example, Discover, Mastercard, Visa, and American Express.
Customers provide their credit card details to the merchant through an online checkout page, or an in-person payment terminal. This information is then sent through the credit card network to the acquiring bank, which either approves or declines the request. This happens near instantaneously, so you get the payment quickly
ACH vs. Credit Card Transactions – The Key Differences
ACH transactions typically take several business days to process, from the moment the transaction is initiated until the funds are deposited into your account. This is because ACH payments are processed in batches once a day.
In contrast, credit card transactions are processed within a matter of seconds or minutes. This is often more convenient for both you and your customers, as you’ll receive their payment much faster than ACH and they’ll have payment confirmation.
Credit cards often have hefty fees for merchants. This is mainly because of the higher risk of fraud and chargebacks when customers use them. These fees vary depending on the specific card processor, but generally range between 1.4% and 3.5% per transaction.
ACH transactions, in comparison, have some of the lowest fees of any electronic payment method as it’s generally a very secure payment method. Typically, ACH payments have a flat fee that is much lower than credit card fees, so it can be especially beneficial for merchants when dealing with larger transactions.
Guarantee of Payment
Credit card payments are “guaranteed fund” transactions. That means that as long as the transaction was processed correctly and the customer is within their credit limit, you’ll receive the full payment.
On the other hand, ACH transactions don’t happen immediately. Since they are only processed in batches, you might find that they are rejected several days after the initial transaction. Rejections can happen for a variety of reasons including insufficient funds, a closed bank account, or a stop payment request.
Should Your Business Accept Credit Cards or ACH Transfers?
Depending on your specific business needs, ACH or credit cards may be more popular with your customers. However, we always recommend providing both and letting your customers decide what works best for them.
The Benefits of Working with Pay.com as Your Payment Service Providers
Some other benefits include:
- User-friendly setup: Get up and running quickly with our user-friendly, no-code solution or integrate our system into your website using our advanced APIs.
- Enhanced security: Pay.com supports 3D Secure 2.0 for added protection against fraudulent transactions.
- Customer insights: The intuitive Pay Dashboard allows you to track your transactions, pull reports, and get detailed customer analysis.
- Global payment processing: Accept payments from customers all around the world.
With a transparent pricing policy and no hidden fees, you can feel confident in your choice to work with Pay.com.
The Bottom Line
ACH and Credit cards payments have different usages for merchants and customers alike. While ACH may have lower fees, it’s also less convenient for many customers. On the other hand, credit cards have higher risks of fraud, but are more widely used.
The best option is to incorporate both as payment options and let your customers decide. Pay.com makes it easy for you to set up a payment system that offers all the payment methods your customers prefer.