If you are a small business, you may have heard the term ACH payments floating around a lot, or Automatic Clearing House. However, you may not be entirely sure what ACH payments are and how they can benefit your business. Read on for an in-depth explanation.
How Do ACH Payments Work?
On the surface, ACH payments and regular wire transfers look very similar, since they are both ways of moving money from one bank account to another. However, there are some distinct differences. Firstly, most processing of wire payments is done in-house by your bank’s central computing system.
ACH payments, on the other hand, are sent to a middleman, and the payments are processed in bulk. From a business perspective, both types of payments are going to get your money where it needs to go, but there are a couple of pros and cons to each kind of payment.
Benefits of Automatic Clearing House Payments
The main benefit of using ACH payments as opposed to wire transfers is that it is much cheaper for you as the end-user. Where a wire transfer could cost your business up to $30 in fees (sometimes more for international transactions), an ACH payment is sometimes free, but generally very inexpensive with the average cost being around $1 per transaction. This is a huge saving if you are sending lots of payments.
Another huge benefit is that ACH transfers are generally considered safer in terms of the security of your money. They can be reversed if a mistake is made or if fraud is suspected, whereas a wire transfer is very difficult to stop once it is in progress.
Many businesses are now using ACH payments for repeat payments as it is a convenient, cost-effective, and safe option for them.
So, Are There Any Drawbacks?
Generally, the processing time of ACH payments is slightly longer than wire transfers. Wire transfer is the fastest system for making payments, with most deposits reaching their recipients instantly (unless transferring overseas). However, an ACH payment, since it is being processed in bulk, will take a few days to process. With this in mind, if you need funds to be sent somewhere very quickly, then ACH in this case may not be the best option for you.
To learn more about ACH Payments head on over to Envestnet | Yodlee, which offers financial services for businesses including Automated Clearing House Payments and bank account verification to ensure the safety of your funds when making transfers.
Wire transfers and ACH payments are both ways of moving money from one bank account to another. Wire transfers are instant, whereas ACH payments can take a few days as they are processed in bulk. Aside from this, ACH payments are much more beneficial to your business. They are considered safer and are also significantly cheaper to send. With this in mind, if you don’t need your money transferred very quickly, ACH should usually be your payment option of choice.