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Getting paid as a small business owner, especially if you operate mostly online, can be tricky business. It can also get expensive. Automated Clearing House (ACH) payments are a way to get paid smoothly, quickly and relatively cheaply, so you can keep more of the money you earn running your business. In this guide, we’ll show you how to accept ACH payments (hint: it’s easier than you might think).
Common Businesses That Accept ACH Payments
Both businesses and customers have a lot of reasons to love ACH payments, but they’re not a perfect fit for every kind of business. If you’re in one of these types of businesses, ACH payments are probably a good fit for you.
Service-Based Businesses
If you sell services and invoice for your work, ACH transfers are a great way to get paid. Whether you’re a freelancer, coach, consultant, massage therapist or construction company, bank transfer is a smart way to collect payments.
This is often easy if you’re a freelancer, consultant or contractor working with established companies. Businesses that pay lots of vendors often have a payment system set up to facilitate ACH payments, so all you have to do is give them your bank information.
If you’re a one-to-one service provider such as a coach or therapist, you probably have to facilitate payments on your end, and clients might be less likely to have their bank information on hand than their credit card.
Subscriptions and Memberships
ACH is great for recurring payments.
Customers only have to enter their information once, so it’s not a burdensome task. And they’re less likely to change bank accounts than to cancel or max out credit cards frequently, so you have less troubleshooting to do over broken payments.
If you run a subscription for a publication, an online community or a yoga or fitness studio, look into adding an ACH payment option for your customers.
Rental Properties
Rent is a major payment every month. Neither you nor your tenants want to bear the fees that accompany a credit card payment for several hundred or thousands of dollars, and cash and checks are outdated, slow and inconvenient.
Make it easy on all parties by accepting ACH payments. Use a rent payment platform such as Avail to let tenants pay online through a bank transfer, and get the money deposited automatically into your account.
How ACH Payments Work
ACH payments are electronic transfers from one bank account to another, almost exclusively within the U.S. They’re facilitated by the Automated Clearing House network, a hub connected to thousands of banks around the country.
If you’ve ever been paid through “direct deposit” from a job or client, the payer likely used the ACH network to facilitate it. Automated transfers among your financial accounts—for example, from your checking account into an IRA at a different institution—usually take place through ACH, too.
How To Initiate an ACH Transfer
To set up an ACH payment with a customer:
- Collect the customer’s bank account information (or, often if you’re acting as a vendor, give your bank account information to the client). You need a bank routing number and account number for both the payer and payee. Generally, this collection happens through a third-party platform, such as Gusto or Stripe.
- Enter the payment amount into the platform.
- Schedule the payment to process—this could be on a scheduled payday or as soon as possible.
- Depending on the platform, you might pay a fee to receive the transfer, or the payer will cover the fee or you’ll pay a flat fee to use the software and no per-transaction fee.
- ACH transfers are processed within bank business hours based on cutoff times each day (your platform will tell you when to expect a transfer to be processed and hit the receiving bank account).
How Long Do ACH Payments Take?
Typical ACH payments take one to two business days to process, though ACH offers a same-day service that usually comes with a higher fee for the payer.
Some payment services, including Zelle, offer instant bank-to-bank transfers via ACH (and other networks) without additional fees. Zelle makes the money available immediately in the recipient’s account and settles the transfer later with ACH.
Cost of Accepting ACH Payments
The cost of accepting ACH payments depends on the platform you (or the payee) use to facilitate it. A typical per-transaction cost is between $3 and $10. Payment processors such as Stripe and Square set the ACH cost at a percentage of the transaction that’s a fraction of the credit card processing fees.
If you’re being paid by a company as a vendor through a platform such as Gusto or Bill.com, it might cost you nothing to accept an ACH payment. Companies typically pay a subscription fee to use their payment processor, which covers ACH transaction fees.
Pros and Cons of Accepting ACH Payments
Here are the benefits and drawbacks of using ACH payments in your small business.
Pros
- Low fees. Compared with wire transfers, credit and debit card transactions and payment processors such as PayPal and Venmo, ACH transaction fees are minimal. You can expect to pay around a 1% fee or less with most platforms (or nothing at all if your client covers the costs).
- Less payment interruption for recurring payments. Subscription and membership businesses are plagued with canceled and maxed-out credit cards. Customers tend to move bank accounts less frequently than they change credit cards, so encouraging them to set up ACH payments could save you some headaches.
- Quicker than wire transfers. Compared with the traditional way to receive a bank-to-bank transfer, ACH is much quicker, settling in one to two days and sometimes as soon as the same day.
Cons
- Not a great fit for point-of-sale (POS) transactions. Customers don’t always carry bank account and routing information in their wallets as they do credit cards, and it would be cumbersome to enter that information at a cash register.
- Slow settlement times. Typical ACH transactions take one to two business days to hit your bank account, while credit or debit card and PayPal transactions are instant. Same Day ACH is becoming more common but currently comes with higher fees for the payer or payee.
- Limited international application. ACH is U.S.-centric. The network continues to expand to include international banks, but they’re limited. Many platforms that facilitate ACH transactions restrict payments to U.S.-based banks.
Platforms That Let You Accept ACH Payments
Dozens of payment platforms facilitate ACH payments for payers and payees. If you want to pay vendors, contractors or employees via ACH from your business, look into these top payroll services.
The following services let you easily accept ACH payments for your services.
Square
Square is a popular online and POS payment system for small businesses. You can accept ACH payments using Square Invoices. It’s free to use, and you pay 1% per ACH transaction (minimum $1).
Stripe
Stripe is an online payment processor that facilitates POS and subscription payments. It’s the built-in payment system for many website builders, membership platforms and invoicing systems. You pay a 0.80% ACH transaction fee, capped at $5.
Braintree
Braintree is an online payment processor owned by PayPal. ACH Direct Debit is available for U.S. transactions for an additional processing fee that varies according to your pricing agreement. Users report 0.75%, capped at $5.
Wave
Wave is an online accounting, invoicing, payments and payroll platform for small businesses and freelancers. When you send an invoice, customers can choose to pay via credit or debit card or ACH transfer directly through the platform. You pay a 1% ACH transaction fee (minimum $1).
Zelle
Zelle works with hundreds of banks around the U.S. If your bank account works with the platform, it’s a great way to get fee-free, instant direct deposit payments from individual clients just by sharing your username or email address.
Frequently Asked Questions
Can anyone accept an ACH payment?
Anyone with a bank account within the Automated Clearing House network can receive an ACH payment. ACH network banks are mostly U.S.-based, but some operate in the U.K. and Europe.
Do all banks accept ACH payments?
Banks have to be part of the Automated Clearing House network to accept and send ACH payments. Thousands of banks, mainly in the U.S., but also in the U.K. and Europe, are part of the network. If you use a bank within the U.S., it’s likely you can accept ACH payments.
Can PayPal receive ACH payments?
PayPal accounts don’t facilitate ACH payments, but PayPal-owned Braintree does. Through PayPal, you can be paid via credit or debit card or directly from a payer’s PayPal balance to yours.
What info do I need to give to receive an ACH payment?
To receive an ACH payment, you need to provide your bank’s routing number and the account number for the checking or savings account you want the money deposited into. With some companies, you may also need to sign an ACH authorization form; your client should provide that if it’s required.
How are ACH payments different from wire transfers?
Although both are electronic fund transfers (EFTs), ACH payments differ from wire transfers in several ways. For example, wire transfers occur instantaneously while ACH payments can take several days to occur. ACH payments are often free or have a minimal fee associated with them while wire transfers always have a fee, sometimes as much as $30 or more per transfer. ACH payments are regarded as a more secure fund transfer than wire transfers as no human involvement is required for ACH payments, unlike with wire transfers. Additionally, you can send and request payments via the ACH system while you can only send payments via a wire transfer.
