ACH Vs. eCheck: Is There a Difference?

As a small business owner, it’s likely that you’ve been looking for ways to speed up the payment process and get more cash flowing into your company a lot sooner. In choosing among payment options for your small business, you may have come across the terms ACH and eCheck.

In fact, the two may have been used interchangeably but there are important distinctions to keep in mind.

ACH Overview

Even if you haven’t used ACH in your small business as yet, there’s a good chance that you have done so in your personal life. For example, when you pay your mortgage online and supply your bank account number and routing information, this is ACH in action. ACH stands for Automatic Clearing House which is really just a fancy term given to this vast electronic network for financial transactions. There are a few key points to understand about ACH:

  • Traditional ACH does not offer any verification or balance confirmation services so payments can be returned.
  • With ACH the threshold for returns or chargebacks is 1% and your account is likely to be terminated once you are close.
  • Standard funding time is 72 hours although next day funding is available upon approval.

eCheck Overview

The SeamlessChex eCheck product is a software platform that allows businesses to verify and remotely create eChecks which they can print and deposit themselves. Other points to note:

  • With eChecks there is a higher threshold for returns and we provide verification to confirm account balances in order to reduce costly return checks or NSF fees.
  • The standard settlement time for all checks is 72 hours although many banks credit your account next day when you use their mobile check deposit feature.
  • Our software offers options to print on plain paper or check paper.

SeamlessChex also offers eCheck Processing services for accounts that meet the requirements. With our eCheck Processing service we deposit the checks directly into your bank account. Currently we offer eCheck Processing with customers at the following major banks: Bank of America, Capital One, Chase, Citi,  M&T Bank, PNC Bank, Santander Bank, TD Bank, Wells Fargo.  

Benefits of ACH and eCheck

Direct bank transfers, i.e. both ACH and eCheck Processing, offer a number of benefits to small businesses:

  • Lowers cost – the fees involved are fixed and generally nominal compared to credit card transactions. In addition, going paperless helps to improve efficiency and cuts down on multiple trips to the bank.
  • Improves cash flow – the easier it is for customers to pay you, the quicker they are likely to do so. This will help your small business optimize the accounts receivable process and free up cash flow in order to meet your current obligations and plan for future growth.
  • Security: offering online direct bank transfer (ACH or eCheck Processing) will give your customers peace of mind as it is one of the most secure methods of payment, backed by banking institutions and the United States Treasury.

So What’s the Key Distinction Between ACH and eChecks?

There are a few differences that you should be aware of:

The requirements for ACH are much more elaborate than eCheck. These include the following:

  • credit check
  • personal guarantee
  • bank underwriting
  • tax returns (in some cases)
  • bank statements (must show balances that equal the daily volume requested)

Overall, these requirements have limited ACH’s utility as a method of payment especially for small businesses that don’t yet have an established track record. On the other hand, eCheck enables secure transactions without these steps.

More specifically, with SeamlessChex, small businesses benefit from instant account setup as there is no credit check, bank underwriting or other documentation required. It is the perfect solution for startups as well as non-traditional or high risk businesses who wish to benefit from accepting check payments online.

ACH fees are around 1% of the transaction amount in addition to a monthly fee around $25. On the other hand, the SeamlessChex eCheck solution charges a flat monthly fee based on the number of checks businesses need to accept and level of verification required. As you can see, eCheck offers a cost-effective solution for businesses with high ticket transactions.

Technology plays a huge role in the efficiency of payment options. When you leverage the benefits of a powerful cloud based platform like SeamlessChex, accepting payment via eCheck becomes much faster than ACH.

How to Get Paid Faster with the Right Payment Company

SeamlessChex allows you to accept and verify checks via web, phone or fax and process payments via eCheck or ACH, all with enhanced security. Need more convincing? SeamlessChex offers a 100% free trial. To learn more about the ways SeamlessChex can benefit your small business, and to sign up for a free trial of the leading check processing software platform, visit our website today.

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