Understanding the difference between payment types can often be tricky, as there are many different options for businesses to process transactions.
In this article, we are looking at different types of payments by comparing them to ACH transfers in regards to security, reliability, speed, and ease of use.
This should help give you a better idea of the way in which your business can utilize different payment methods and how each type compares to ACH transfers.
ACH Payment Processing Overview
Using ACH to process payments or transfers is simple and secure.
As one of the largest payment systems in the U.S., the Automated Clearing House (ACH) is considered to be one of the safest and most reliable methods of payment and is protected under federal law.
The ACH processes batches of transactions several times throughout the day, authorizing fund transfers from one account to another. This leads to a processing time of several business days, though the heightened security often makes this delay worthwhile.
Since ACH transfers use bank account information rather than credit card information, you bypass any additional fees associated with credit card payment processing. Different banks offer transaction fees to process ACH payments, and some outsourcing services offer this service free of charge. If your business is processing hundreds of payments every month, a small or nonexistent fee can lead to incredible cost savings.
Each of these requires the user to authorize access to their bank account. You can set up recurring payment types, like with automatic bill pay or regular vendor payment, or you can set one-time-transfers using ACH Credit transfer to move money from one account to another.
ACH vs. Wire Transfers
For secure and fast payment options, both ACH and Wire Transfers fit your business needs. ACH payments are backed by a reliable institution and allow you to maintain control over your funds even after you send the payment. Using this payment method, you can reverse fraudulent charges and verify payments even after funds are sent.
Wire transfers are useful when you need to send money to another bank account or person quickly. Fund transfers happen immediately but cannot be reversed, which requires you to make sure the payment information you have is accurate, and you have verified the payee. Non-bank wire transfer options allow you to send payment without disclosing sensitive bank information, but this is often at a higher cost.
Though Wire Transfers provide you with a speedy transfer, ACH’s security can offer peace of mind when handling your business transactions.
ACH vs. EFT
ACH transfers and Electronic Funds Transfers (EFTs) are similar in that both refer to types of electronic transactions that move money from one account to another.
EFT is a broader term encompassing all online payments, whereas ACH transfers refer only to money transfers through the Automated Clearing House network. An ACH Transfer is considered to be a type of EFT. In other words, EFT offers a variety of electronic solutions to payment processing, and ACH provides a secure method to transfer those electronic payments.
Payments made using ACH transfers can take several days to process, but again this method promises a high level of security.
EFT is useful for all types of online transactions, including ATM withdrawals and merchandise payments, by eliminating the need for paper checks. Funds are often transferred within a day or two but can be subject to fraudulent charges through stolen information.
ACH vs. Electronic Checks
If you are primarily focused on security, you will be happy to know that both ACH transfers and eChecks, or electronic checks, are processed through the Automated Clearing House.
Electronic checks allow your business to capture the same information as with paper checks but reduce the cost drastically by eliminating paper and trips to the bank. With electronic data capture, you can transfer information on a physical check into your digital banking system to quickly deposit payments.
If your business handles transactions primarily online, you may consider ACH transfers to reduce the amount of time it takes to receive and deposit funds. ACH transfers use bank account information to send funds from one pre-authorized account to another. Using this method, once you set up the initial authorization, you are ready to go.
eChecks are a great solution to traditional check processing, and the entire process can be made even easier by setting up pre-approved ACH transfers.
ACH vs. Direct Deposit
If you are regularly paying employees or vendors the same amount every week, setting up a pre-approved direct deposit can automate the payment process.
Your business authorizes payment but does not have to track individual invoices or mail physical checks, which saves both time and money. However, ACH direct payment gives your company more flexibility and control over funds.
Overall, the difference between the two is the amount of control your business has over its payment information. You can easily change the payment amount, date of payment, or routing information using ACH transfers, whereas direct deposit automatically sends payment at a set time without intervention.
ACH vs. Credit Card Payment
The thought of receiving a payment only to have it reversed for insufficient funds is scary. Credit cards offer a solution to this problem by guaranteeing payment, as long as the cardholder is within their credit limits.
With ACH payments, it may take several business days for the ACH to realize there are insufficient funds in an account.
The biggest difference between the two types of payment methods is cost. For businesses looking for a simplified vendor payment method, accepting credit cards may be an expensive option but can guarantee payment in a way other direct payment methods may not. ACH payments transfer money from one bank account to another, relying on available funds to make payments or purchases.
If your business is looking to maximize profits, ACH offers an inexpensive and often free option to handle electronic payments.
ACH vs. Virtual Cards
Both ACH payments and virtual cards offer you the ability to control your electronic payments through secure systems.
With ACH payments you have the added benefit of using the safest method of payment available by authorizing bank account information for fund transfers. Virtual cards are not directly linked to any bank or credit card account, so your sensitive information is less vulnerable to fraud, but with fast expiration dates you will need to generate and issue new cards for each payment.
If your business is looking to have complete control over your funds, virtual cards let you set credit limits, expiration dates, and payment release. If you need a payment method for sending regular funds to a trusted vendor, ACH transfers might be the smart choice.
As you can see, there are many payment methods available for your business. Depending on your company’s needs, you may find a payment solution with one or multiple different types of payments. ACH transfers offer you a secure and reliable method for transferring funds from one account to another, allowing you to control the transaction type, the method of payment, and automate regular payments.