ACH and Check 21 Payment Processing Advantages
Save Your Business Time and Money Today
There are a few differences between ACH and Check 21 payment processing. Each system has unique advantages from which merchants may benefit depending on their business type. However, both methods can save merchants valuable time, money and paperwork. Instabill seeks to inform all merchants about how ACH and Check 21 payments work and how each system would affect their business.
Check 21 Payment Processing Advantages
Check 21 is a method of electronic payment processing that involves rendering a digital form of a paper check and submitting it to receive the payment. Check 21 has been embraced as a cheaper and paperless alternative to processing check payments. Here is how it works:
- A check is scanned and truncated into digital form
- Check data is sent to the Federal Banking System for processing
- The customer’s account is debited and the funds are deposited into the merchant account.
Check 21 is effective as an alternative form of payment processing for certain high risk industries, including Payday Loans, Nutraceuticals, Magazine Subscriptions, Adult Entertainment, E-Cigarettes, and more.
The ACH Advantage
ACH processing is more complex. ACH is an electronic payment system which allows merchants to deduct funds straight from their customers’ bank accounts. One ACH advantage is that it saves time, money and paperwork since the customer and merchant do not exchange any documents or check numbers. Another ACH advantage is that it is secure.
Below is a step-by-step list of how ACH processing works:
- Your customer provides written, verbal, or electronic authorization for you to process the check.
- Whether through a payment gateway, virtual terminal, or batch file transmission, you convert the check into an ACH transaction and submit it to your check processor.
- Your check processor sends ACH transaction to your customer’s financial institution that provided the checking account to debit the approved funds.
- Usually within three days, your account will receive the payout for the approved funds. Though in recent years, NACHA, the governing body of ACH transactions, is pushing ACH transactions to same-day settlement.
Keep in mind that if your customer does not authorize the transaction or if he or she does not have sufficient funds, the customer’s financial institution can decline the ACH transaction.
ACH processing is a good solution for low risk industries including utilities, bill payments, continuity, insurance, and more. Merchants will find that many expenses that come with processing paper checks are eliminated through ACH, creating a faster and more efficient way to accept payments. Qualifying merchants can also save on:
- The clerical cost for account reconciliation
- Stop payment charges and check reissue costs. In fact, these costs are completely eliminated
- Administration and operating expenses
- Paper handling costs called remittance processing costs because checks are not used
- Bank service charges, which may be reduced
Same-day ACH: It’s here
The movement to same-day ACH processing, which was established in three phases, is in full effect. The first phase, which commenced in September of 2016, involved only ACH credits and transactions up to $25,000. Phase 2, which began Sept. 17, 2017, marked the beginning of banks processing ACH debits. Phase 3 began on March 16, 2018 — the deadline for banks to have the infrastructure to settle ACH transactions by 5:00 p.m. on any given business day.
Check payment solutions keep merchants open for business
Instabill is well-known for providing merchant accounts to high risk businesses such as online pharmacies, nutraceuticals, CBD and wellness, and travel among many other high risk industries. Although online merchants are very credit card centric, we suggest they also establish a check payment solution along with credit card processing.
Particularly with high risk industries, acquiring banks can be unpredictable. We’ve seen acquirers cease offering payment solutions for certain high risk industries because of high chargeback rates, reputation concerns or for no reason at all. For that very reason, we offer electronic check payment solutions, which can carry a high risk online business to its next credit card processing solution.
Speak with a Live Representative Today
There are many different advantages to ACH and Check 21 payment processing, however, both methods can help merchants with their payments. Qualifying merchants may be eligible for both payment processing methods with Instabill’s merchant services. If you have questions about what is an ACH check and Check 21 processing advantages, or if you want to apply for one of Instabill’s merchant accounts today, simply click the button above. You can also contact us online or call 1-800-318-2713 to speak with a live representative.