Many business owners are now switching from standard bank wire transfer payments to ACH payments (automated clearing house) payments. If you have never heard of ACH payments, don’t panic – it’s not too late to take advantage of this service for your business. But why are more and more people now choosing this alternative, albeit a slower payment method? In this article, we will explore some of the reasons behind this trend.
What’s So Great About Automated Clearing House Payments?
Yes, you read correctly earlier, that these payments are slower than your standard wire transfer. On average, an ACH payment will take 2-3 days to complete, whereas in many cases a wire transfer is instant unless transferring overseas. But, there are some HUGE benefits to ACH over wire transfer with the main one being the cost. If you send a lot of payments or regularly occurring payments then ACH could be a great way for you to save money.
The average wire transfer has a fee of around $30. In many cases, an ACH payment will cost around $1 and is sometimes even free! The other main benefit is that ACH payments can usually be reversed, so if you suspect you have been scammed, you can stop the payment, which is much more difficult to do with a traditional wire transfer system.
How Do Automated Clearing House Payments Work?
Well, from the outside, an ACH bank transfer looks very similar to a normal bank transfer. You make a payment, and it arrives with the recipient. However, the main difference is that an ACH bank transfer is first sent to a clearinghouse (essentially a middle man) where they will be sent on in bulk.
Wire transfers are dealt with on an individual basis, whereas ACH payments are sent elsewhere, alongside other transactions to be dealt with. This is why ACH payments take a little longer than traditional wire transfers, however, you are essentially getting the same service for a much cheaper rate.
If you are interested in learning more about the ACH bank transfer, we highly suggest checking out Envetnet | Yodlee which specializes in ACH solutions, helping businesses to streamline payments. They can help you find the best solutions to match your business and banking needs and even have API so you can integrate their solutions across your business applications as well!
Should I Use ACH Payments?
If you care more about time than low fees and security, then a normal bank wire transfer could be a good option for you. However, if you don’t mind waiting those couple of extra days then the benefits of an ACH bank transfer far outweigh the disadvantages.
Remember ACH payments are generally safer, because you can stop them should you suspect fraud, but on top of this they are far cheaper than standard wire transfers. You can effectively send 30 automated clearing house payments for the price of one single bank transfer payment. So, if your business sends multiple transfers every month, or has a lot of regular payments going out, then ACH could be a great solution for your business.