Many businesses are now utilizing ACH (Automated Clearing House) payments as opposed to bank transfers, but if you have never come across them before you are probably wondering why.
ACH is a great option for most small businesses and comes with a whole host of benefits.
In this article, we will explore the main differences between Automated Clearing House payments and traditional wire bank transfers, as well as what makes ACH payments potentially a better option for you and your business.
What is an ACH Payment?
An automated clearing house (ACH payment) is simply another method of transferring money from one account to another.
From the outside, it looks very similar to a traditional payment, you send the money and it arrives with your recipient. However, the processing system is slightly different, in that wire transfers are usually dealt with by your bank’s internal computer system on an individual basis, whereas ACH payments are sent in bulk to a clearing house (essentially a middleman) to process.
What Are The Benefits of ACH Payments?
ACH Payments have many great benefits.
Firstly, A wire transfer can often cost up to $30 per transaction, whereas an ACH payment is often free and usually never more than $1.50 per transaction.
This means if your business sends a lot of digital payments, using Automated Clearing House payments as opposed to a traditional wire transfer will almost certainly save you a significant amount in fees.
In addition to this, ACH payments are considered safer.
This is because, during the processing time, they can be reversed, which is very difficult with a traditional bank transfer because they are usually instant.
If you are interested in learning more about ACH Money Transfer payments and how your business can utilize the service, a company like Envestnet | Yodlee can help. Envestnet | Yodlee specializes in financial solutions for business including ACH transfer payments and other security measures such as instant account verification, allowing you to send payments with confidence.
Are There Any Drawbacks of ACH Payments?
Yes, there is one small drawback in that Automated Clearing House payments take slightly more time to reach their destination.
A wire bank transfer will usually be with the recipient instantly (especially if you’re doing a domestic transfer.) However, an ACH payment can take 1-3 days to reach the recipient, largely because the payments are being processed in bulk.
However, this delay can be a blessing, as it allows you to reverse the transaction should you find you have been the victim of fraud, so in some cases this drawback can be seen as a benefit.
If time is of the essence for you when making payments in your business, then ACH payments may not be the right solution for you. However, if you can wait a couple of days for a payment to be made, there is a significant upside to using this type of transfer as opposed to a traditional one, including added security, peace of mind, and significantly lower transaction fees.
Founder Dinis Guarda
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