ACH Processing 101: How Does It Work?

ACH Processing 101: How Does It Work?

ACH Processing 101: How Does It Work?

You’ve probably been receiving or sending Automated Clearing House (ACH) payments, though you may be unfamiliar with the term. When you receive a direct deposit from your employer, pay direct deposit wages to your employees, or pay bills electronically, you are using ACH payments. Let’s take a look at how the ACH payment processing works and the reasons many high-risk industries turn to an ACH transfer for accepting customer payments.

How Do ACH Payments Work?

Every ACH payment goes through the ACH network. This electronic funds transfer system is run by NACHA (formerly called the National Automated Clearing House Association) and has been around for 46 years.

For companies that use ACH payments, the process starts with a direct payment transaction from your customer using the ACH network. First, they enter their account information. Then, the customer’s bank, otherwise known as the originating depository financial institution (ODFI), batches the ACH transactions and sends them out.

These payments are then received by the clearing house ACH network. The ACH operator batches these transactions and makes them available to the bank or financial institution receiving the funds. The business owners receive the fund in their bank account and the transaction is complete.

In essence, ACH processing services allows your business to accept electronic check payments: customers simply provide their bank routing number and checking account number. The payment is verified and sent electronically for a transfer of funds.

What are the Benefits of ACH Processing?


Obtaining approval in order to accept ACH payments is usually fast and easy. In fact, for most businesses, this type of payment is usually approved before credit card processing.

ACH payments also process much faster. Confirming that a transaction had cleared use to take up to four days, making it difficult for companies, such as ecommerce, whose customers rely on quick shipments. Today, with the advent of Same Day ACH online check processing, money from one bank to another has decreased.

According to NACHA, the average ACH debit transaction settles in one business day while the average ACH credit transaction settles in one to two business days. In fact, the transfer of funds from one bank account to another usually takes place the day after the transaction was initiated.

By March 19, 2021, changes to NACHA’s operating rules will enable most (if not all) ACH transactions to settle the same day as initiated.

Compare online ACH processing time to card charges which can take up to three days. For high-risk accounts, that amount increases to four days. Even debit cards take longer to process and pull funds from.

And, let’s face it, no one’s paying with paper checks any more. Well, almost no one. In 2017 and 2018, consumers used paper checks for just 7 percent of their transactions.

Reduced Chargebacks

ACH processing from a bank account is much harder to dispute than a card transaction. It also must be disputed within a shorter time frame.

Reasons for ACH chargebacks include if the transaction or the dollar amount was not authorized, or if the ACH transfers before the date it was authorized. Customers can dispute card transactions for up to 180 days while ACH limits the time to 60 days. These chargebacks are particularly difficult for a small business or for those who are trying to clean up a past merchant account.

Customer Retention

Today, nearly 95 percent of U.S. households have a bank account or credit union account. Additionally, CNBC reports that the average American has four credit cards.

Customers are increasingly turning to this type of payment method. During the third quarter of 2020, 6.8 billion payments were made on the ACH Network. In addition, the average dollar amount of a same-day ACH payment increased by 31 percent.

If your business only offers credit card payments, you’re guaranteed to be losing out on sales.

Recurring Payments

ACH processing is superior to credit cards for recurring billing purposes. Unlike cards, consumers rarely change their bank account. Going from one account to another disrupts direct deposits as well as monthly bill pay. This makes the ACH payment, that is charged to a bank account, much more reliable in terms of recurring payments.

Every ACH merchant account has an unlimited recurring billing plan.

Increase Sales

Businesses that add ACH processing services to their payment options report an increase of sales from 10 to 30 percent. In 2019, ACH transactions totaled more than $55 trillion.

For ecommerce businesses, abandoned shopping cars are reduced when customers arrive at checkout and find an ACH debit option. Many customers are turning to ACH payments, particularly those that do not like to pay with credit cards or client’s whose credit and debit card are maxed out or have insufficient funds.

This is also a viable option and a way to save sales should a customer’s credit or debit card get declined.

Only 30 percent of ecommerce websites offer ACH payments. Become part of the minority and gain an edge over those businesses that don’t understand how ACH payments work or the many benefits found with this type of payment.

In fact, you can even use these payments to attract environmentally conscious customers who prefer to go paperless.

Reduce Costs

More and more businesses are turning to ACH processing services due to their cost-effective nature and reduced transaction fees. Transaction costs for ACH payments are much lower than credit card merchant accounts. Unlike cards that charge a percentage fee, an ACH transaction fee is a fixed amount per transaction.

For those who are still in the dark age of the wire transfer, the average cost to receive money comes in at around $15 for national wire transfers.

Why Choose High Risk Pay for Your High Risk ACH Processing Services?

At High Risk Pay, almost every business is accepted and most merchants can begin accepting electronic payments in four days or less.

We also take your safety seriously and have implemented measures that detect fraud. And, in most cases, no one in your business will have access to your customer’s bank account number or any bank account information. Financial institutions move money and process a payment through secure, encrypted channels.

For those businesses in high-risk industries, the benefits are remarkable. At High Risk Pay we do not charge an application or setup fee, and our approval rate is 99 percent! Contact us today.

We Can Get You Approved!

Having trouble getting approved for your high risk merchant account? Did you know HighRiskPay approves 99% of all applicants!