ACH
Also known as: Automated Clearing House, Bank transfer
A US network for low-cost bank-to-bank transfers, cheaper than cards for large payments.
ACH (Automated Clearing House) moves money directly between US bank accounts in batches. Because fees are usually a small flat amount rather than a percentage, ACH is far cheaper than cards for high-value or recurring payments, at the cost of slower settlement (a few business days).
How it works
The mechanics are unglamorous. You collect a routing and account number plus a signed or recorded authorization to debit. Your provider hands that debit to an originating bank, which submits it into the ACH network, and the network delivers it to the customer's bank, which either pays the item or returns it. Same-day windows exist for an extra fee. Standard entries still run on a one to three business day cycle.
What surprises merchants is the tail. An ACH return is not a chargeback, but a consumer can claim a debit was unauthorized for up to 60 days after the statement it appeared on, and the funds get pulled back with a return fee attached. Keep the signed authorization on file. Check as well whether your provider verifies account ownership before the first debit, because a mistyped account number tends to surface only after you have shipped.
None of which stops the economics winning at a certain ticket size. ACH is normally priced as a flat fee per transaction, often under a dollar, or as a low percentage with a cap, so your cost stops rising with the amount while a card fee keeps climbing. On a $5,000 invoice that is roughly $145 at a 2.9% card rate against well under a dollar. Speed and settled certainty are what you trade away.
Worked example
$2,091.60 a year against $6. That is a design studio billing a $6,000 retainer monthly: on flat-rate card pricing at 2.9% plus $0.30 the fee is $174.30 a month, while the same invoice collected by ACH at a $0.50 flat fee costs $6 over the year. The trade is a few business days of clearing instead of next-day funding, plus the occasional returned debit to chase.
Frequently asked questions
- Is ACH cheaper than accepting a credit card?
- Almost always, because ACH is priced as a flat fee and cards are priced as a percentage of the sale. A $2,000 payment might cost well under a dollar by ACH and around $58 at a 2.9% card rate. The two only converge on very small tickets of a few dollars, and cards still win there on speed and convenience.
- How long does an ACH payment take to clear?
- One to three business days for standard ACH; same-day ACH can settle the same afternoon if you pay extra for it. Clearing is not the same as certainty, though. A debit can still be returned for insufficient funds after it looks like it has gone through, which is why many businesses wait several days before shipping high-value goods paid this way.
- Can ACH payments be reversed like a chargeback?
- They can be reversed, but through a different process with different deadlines. A consumer has up to 60 days after the statement a debit appeared on to claim it was unauthorized, and the bank returns the funds. Insufficient-funds returns usually land within a couple of business days. There is no formal representment stage as there is with cards, so a valid signed authorization is your main defence.