How to Accept ACH Payments From Your Customers

If you run a recurring payments business, accepting payments via ACH vs. credit cards or PayPal can be a great way to reduce payment processing fees and failed payment rates.

Credit cards and PayPal work well, but have many disadvantages:

  • High fees,
  • Chargebacks
  • Frozen funds, etc.

If you can throw ACH payments into the mix, you’ll find that customers often don’t mind paying with their bank account, reducing the costs of selling your products or services and the operational headaches of having to deal with failed payments.

What are ACH payments?

You may already associate ACH payments with payroll direct deposits, tax payments, payment of utility bills, etc. Well, that’s really all there is to it.

Here’s all you need to know: ACH payments are bank to bank payments in the United States. The “ACH” stands for “Automated Clearing House,” the electronic funds transfer system used to processes bank to bank payments.

Other countries call these payments by different acronyms (SEPA, in Europe, for example), but it all amounts to the same thing: bank to bank payments.

The Main Benefits of ACH Payments

Lower Transaction Fees

One of the biggest benefits of ACH payments is lower transaction fees. If you’re using Stripe in the U.S., you’re paying a starting rate of 2.9% + $0.30 to process each transaction. Accepting an ACH payment on Stripe costs .8%, capped at $5.

If you have a sale for $100, you’ll pay a $0.8 fee; anything above $625 pays the max $5 fee. If you recurring payments business that routinely accepts amounts larger than $625, the lower fees amount to a pretty significantly monthly savings.

Less Failed Payments

If you run a recurring payments business, you know a common reason behind losing customers is failed payments. Payments made with ACH have lower failure rates than those made with credit cards simply because bank accounts don’t expire.

Since ACH payments are made directly from one bank account to another, as long as your customer has an active bank account, you won’t experience many failed payments.

Less Disputes

If you’ve ever dealt with a credit card dispute from a customer, you know that the burden of proof is often on the business to prove that the customer was charged correctly.

Often, whether you win or lose the dispute comes down to how well-designed your checkout process is:

  • Whether the customer agreed to your terms and conditions.
  • Whether you have a record of the customer’s IP address used at the time of purchase.
  • Whether you sent a receipt in a timely manner.
  • And the content of the messages you exchanged with the customer both before and after the purchase.

Even if you have all your ducks in a row, banks can often decide the dispute in the customer’s favor, leaving you with no recourse for getting your money back. There is no appeals process.

With ACH payments, customer-initiated disputes are less common simply because there are more rules regarding when a customer can dispute a payment.

Namely, customers only have 60 days to dispute a transaction, in writing, and there are only three reasons they can dispute a charge:

  1. The transaction was never authorized or the authorization was revoked.
  2. The transaction was processed on a date earlier than authorized.
  3. The transaction was for an amount different than was authorized.

That’s it. This shifts the burden of proof to the customer and leads to much lower chargeback rates for the business.

Now that you’re here…

If you’d like to learn more about how ChargeKeep can help you collect ACH payments, get a demo or just give it a try yourself by signing-up.

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