ACH transaction fees can be a little confusing, especially if you’re not familiar with the ins and outs of electronic payment processing. In this article, we’ll take a closer look at what ACH transaction fees are, and how they can impact your business. We’ll also explore the hidden costs of check processing, and discuss some of the best ways to avoid them.
What is ACH?
ACH (Automated Clearing House) is a network used by banks and financial institutions to process electronic credit and debit transactions between participating depository institutions, such as Wells Fargo and Chase. It’s basically an automated clearing house; the term ‘Automated’ means that no people are involved in the clearing process, and ‘clearing house’ means that there’s a central organization responsible for processing all of these transactions. Even if you’re not familiar with ACH, chances are good that you’ve had some experience with it at one point or another. Have you ever received an electronic deposit into your checking account? Have you ever transferred money from your savings account to your checking? Have you ever received a wire transfer into your business bank account? If so, then you’ve used ACH.
ACH transactions are processed electronically between the customers – often referred to as Originators – and their banks – known as Receivers – using the ACH Network. The money is transferred from one account to another, and the ACH Network ensures that the funds are transferred securely and efficiently.
What are ACH Transaction Fees?
ACH transaction fees are the fees associated with processing electronic payments through the ACH Network. These fees can vary depending on the type of transaction, the amount of money being transferred, and the banks involved in the transaction. In most cases, the Originator – that is, the customer initiating the payment – is responsible for paying the ACH transaction fees.
There are two types of ACH transactions:
1) Credit transactions – This type of transaction allows customers to send money from their checking or savings account to another bank account. The money is withdrawn directly from their account and deposited into the Receiver’s account.
2) Debit transactions – This type of transaction transfers money from the customer’s checking or savings account to cover a purchase, such as paying for an eBay purchase or funding a direct deposit. The money is transferred directly from their bank account to pay for the purchase.
How much do ACH transaction fees cost?
ACH credit transactions typically cost between $0.50 and $2.95 per transaction, while debit transactions can cost up to $5 per each transaction. While these fees may not seem like a lot at first glance, they add up quickly when multiple ACH credit or debit transactions are being made every day. For example, consider an online store that processes 100 ACH credit transactions per day, at a fee of $1 each. That’s $100 in fees every single day.
And if you’re processing hundreds or even thousands of these types of transactions on a regular basis, the costs can become especially burdensome.
What’s more, these transaction fees tend to be much higher than the average credit card processing fee, which is between 1.5% and 3%. That means that your business could already be losing money by choosing to accept ACH payments rather than credit cards.
Are There Any Ways to Avoid ACH Transaction Fees?
ACH credit transactions are even more expensive than debit transactions, so one way that businesses can avoid ACH fees is by encouraging customers to pay for purchases with credit cards instead of ACH. Those $1 transaction fees quickly add up when applied to numerous sales transactions, but they become negligible when compared to the higher credit card processing fees most businesses charge.
Businesses that process large volumes of ACH transactions might consider working with a company like Payment Depot, which offers ACH processing services at rates that are significantly lower than the competition. There’s no obligation to sign on with Payment Depot, but businesses that choose to work with them don’t have to worry about exorbitant transaction fees either.
Are there any other ACH fees?
There are also maintenance fees associated with ACH transactions, which vary depending on the size of the business. These fees generally do not exceed $25 per month though.
ACH transaction fees can quickly add up for businesses that process several credit or debit transactions on a daily basis, but there are ways to avoid these costs. By encouraging customers to pay with credit cards instead of ACH, businesses can save a significant amount of money on processing fees. And by working with a company like Payment Depot, businesses can enjoy even lower rates for their ACH transactions.