What Is ACH Bank Transfers?
In addition to credit card and cash, both consumers and businesses may notice an additional payment option called Automated Clearing House (ACH.) This form of electronic money transfer allows merchants to quickly and easily accept and move large sums of money at relatively low fees. This process is administered by NACHA, The National Automated Clearing House Association.
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Interbank Clearing
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According to Pay Simple, ACH provides for the interbank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH Operators, through which financial institutions transmit or receive ACH transactions.
Function
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The ACH payment processor Pay Simple notes that ACH transactions electronically move funds between accounts in and among participating financial institutions. When a merchant processes a transaction, the service notifies the customer’s bank of the amount, debits that amount, and notifies the merchant’s bank of an incoming deposit.
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Cost
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Though the transactions occur electronically, ACH service providers charge merchants a small fee for each exchange. As of July 2010, Pay Simple charged merchants approximately 55 cents for each ACH transaction, though other merchant account fees and costs may also apply.
Misconceptions
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Though many view ACH and wire transfer services as synonymous with one another, the ACH service provider Sovereign Bank notes that the two are different services. While service providers process ACH transactions through a clearing house, wire transfer transactions must be processed through the Federal Reserve Wire Network.
Benefits
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ACH allows merchants to accept check payments electronically without requiring the customer to present a physical check. According to Pay Simple, ACH transactions also take place quickly and may settle as soon as the next business day.
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References
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