ACH Check Processing vs Credit Card Processing

Recently I was talking to a colleague in the payment industry, and he was telling me about ACH Processing. And after a few minutes of talking with him, I couldn’t help but wonder why more small businesses don’t use it?
Let’s look at a specific example. John is an electrician. He takes most of his payments as either checks, or credit card payments. His credit card system is somewhat antiquated, he takes the number, and runs it when he gets back to the office.
Assume John has a client who needs $1000 of work done.
  • If he takes a check, the money might take 5-10 days to clear. That’s if he deposits it today.
  • Paper checks can cost anywhere from $1 – $8 each to process.
  • If he takes a credit card payment, he’ll lose somewhere between 2.5% and 3% in fees.

So, what can ACH processing do to help?

1.) It’s faster. Instead of taking a few weeks, it takes a day, maybe 2.
2.) It’s cheaper. WAY cheaper. Our electrician friend will pay $25 to process that credit card for $1,000. He could process $10,000 in ACH payments for about the same. It’s $0.50 or so per transaction!
3.) You can take these payments online, or over the phone. Rather than having to drive to your customer, or wait for them to mail a check.
4.) It’s very easy to setup recurring payments with ACH. So if you have a product or service your customer buys, you can automate the process.
So what’s the catch? Well, simple enough, the funds can bounce. Even weeks later, you can receive a notice saying there were insufficient funds. Now, while that is a problem, it’s a problem that also exists with checks.
If you’re interested in ACH, most of this information is from my buddy John over at Gulf Management. You can get in touch on his website here.
Otherwise, as always, feel free to get in touch with me here, read my other stuff, or on Twitter!
Cole Goebel
Cole Goebel is a POS Industry insider. He's an expert in encoding and barcode data, and has a great knowledge of POS integrations. Cole currently works at Plastic Printers in Minnesota, where he's the Channel Manager. He works directly with POS providers to deliver gift, and loyalty cards to their clients.

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