Automated Clearing House is used to electronically transfer money between banks. Explore what ACH payments are and how it works to send money hassle-free.
Understanding the many ways to send, transfer, and receive money is essential to sustaining your business as a merchant—and that starts with ACH payments.
In this article, we’ll break down the basics of ACH payments, including:
ACH, or Automated Clearing House, is a direct payment method that can electronically transfer money between banking networks in the United States.
Here’s how ACH payments work: These electronic transactions allow business owners or their customers to debit funds directly from their respective bank accounts instead of processing a transaction via credit card, paper check, wire transfer, or cash. In other words, ACH payments facilitate the transfer of funds between bank accounts via a centralized clearing system.
Here are a few common examples of ACH payments:
Read on to learn more about ACH payments and how they can help you send money easily.
There are two types of ACH payments: credit and debit. Here’s what they mean:
Is ACH the same as direct deposit? Here’s the difference between ACH and direct deposit: Direct deposits fall under the umbrella of ACH payments. Because direct deposit is a specific type of ACH payment, it primarily focuses on depositing funds directly into an individual's account.
In general, ACH refers to a system that can electronically move funds between bank accounts for various types of transactions, including deposits, withdrawals, and transfers. When it comes to ACH direct deposits, they’re commonly used for employee payroll.
In the world of ACH payments, it’s important to familiarize yourself with common transaction terms that may come up when sending or receiving money.
The short answer? A couple of days, at least. ACH payments are not an immediate payment method like a credit card. Instead, they are processed in batches based on when the transaction is submitted. On average, an ACH payment can take three to five business days to process.
Keep in mind: With ACH, there are no prior authorizations as there are with credit card transactions, so a receiving bank may choose to hold back the money while they verify that the originating bank has sufficient funds available to complete the transaction without issue.
Before sending an ACH payment, you’ll typically need the following information:
Why use ACH to accept payments? From saving time to avoiding potential fees, there are numerous benefits of ACH payments for small businesses, as well as some drawbacks to make note of.
As a business owner, here are some potential benefits of ACH payments:
There are some disadvantages and limitations of ACH payments, such as:
There are some reasons why ACH payments can be rejected, including:
Beyond ACH payments, you may utilize alternative payment methods and checkout payment methods provided by PayPal, such as:
In partnership with three expert business owners, the PayPal Bootcamp includes practical checklists and a short video loaded with tips to help take your business to the next level.
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