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ACH briefing..

Posted on December 31st, 2007 by Sanjit Anand ||Email This Post Email This Post

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Someone ask offline for ACH, as term appears in my last post, so thought to have a briefing…here to go

What is ACH?
ACH stands for Automated Clearing House.

The rules for ACH transactions are prepared by the National Automated Clearing House Association (NACHA).

Normally it refers to a national network used by banks and other financial institutions to move transactions (i.e., checks) between financial institutions.

In other sense moving money electronically to and from checking and savings accounts. Typical example would be a check by phone or taking recurring payments directly from a checking/saving account.

• ACH is a “loosely” defined standard for electronic fund transactions.

• Why use ACH payment processing?

  • More secured transaction than hardcopy check
  • Convenience of electronic banking. No visits to bank
  • Increases good-will with employees and suppliers
  • Immediate, tangible savings on every ACH transaction vs. hardcopy check!!!

The Difference with ACH & Credit Card

The MAJOR difference between ACH and credit card processing is that a credit card transaction “captures”
the merchant’s funds from the consumer and essentially guarantees payment. An ACH transaction is a request to transfer funds. The transaction may reject for several reasons with the most common being NSF (non sufficient funds) or a closed account. The funds are not guaranteed.

To debit a consumer’s checking or savings account you need their permission to do so. Failure to produce proof of the authorization either by voice recording (one-time payments) or an ACH Authorization form can have consequences.

Where it is popular?

ACH Transaction in US iteslf sharing more than 40% payment pie. This was provided in recent releases Federal Reserve Payment Study.

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