How to accept ACH payments in 2024

Cat McAlpine

BLUEPRINT

Updated 12:27 p.m. UTC Jan. 18, 2024

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Mike De Sisti / Milwaukee Journal Sentinel / USA TODAY NETWORK, Imagn Images

Payment processing can be daunting for small business owners, but it doesn’t have to be. Credit and debit cards are the most common form of payment, especially for online services. But it’s beneficial to accept ACH payments, too.

By adding more forms of payment, you reach more customers. ACH payments add flexibility to your business and are easy to adopt. This article covers what an ACH payment is, how to accept ACH payments, what the associated costs are and the pros and cons to help determine if ACH payments are a good fit for your business.

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What is an ACH payment?

An ACH payment is an electronic transfer of funds between institutions, like banks and credit unions, that occurs using the Automated Clearing House network.

ACH payments can be used to deposit checks, automate billing and schedule recurring charges. Because of the secure process, ACH payments are preferred for payments like employee direct deposit and federal payments.

There are two kinds of ACH payments: credit and debit. A credit occurs when funds are deposited into an account, like with direct deposit. An employee gives their place of work their banking information. When it is time to distribute pay, the company uses that banking information to request that funds be deposited in the employee’s account.

A debit occurs when a request is submitted for the withdrawal of funds. Recurring billing is a good example. Customers submit their banking information to their utility company. Monthly, the utility company submits a request that funds are withdrawn from the customer’s account.

How to accept ACH payments

Processing ACH payments requires the banking account and routing numbers for both financial institutions involved in the transfer. Either you can initiate the transfer of funds with customer approval or customers can initiate payment to you.

It’s easiest to scale by managing payments on your end so that you can submit all your ACH requests at the same time regularly rather than waiting for customers to submit their payments.

To process ACH payments, you’ll need the following:

A business bank account: Check with your banking institution to make sure your account is properly set up, both as a business account and enabled to receive ACH payments.
Payment processing: Make sure that whatever financial platform you’re using has a secure way for customers to input their banking account and routing numbers for ACH payments.
Customer approval: Customers will need to approve an ACH mandate, either as a one-time approval or a recurring approval for each payment, whichever you prefer.
A validating tool: Connect with your payment platform to review how they validate ACH information so that there are no delayed or rejected payments.

Should you accept ACH payments?

ACH payments are a secure way to manage recurring charges, but they can be limiting when processing frequent charges or large sums. The below exploration of advantages and disadvantages can help you decide if ACH payments are right for your business.

Advantages of ACH payments

ACH Payments allow you to set up automated, recurring payments, ensuring that billing is handled on time, every time. By avoiding paper checks and issuing bills, you save time and money on administrative processes.

ACH payments tend to incur lower fees than credit cards or paper checks. ACH payments can also be paused or canceled if an error has been made.

Disadvantages of ACH payments

Many financial institutions limit the number of ACH payments that can be processed either on a weekly or monthly basis. Additionally, there are limits on how much money can be moved per transaction.

These vary depending on the financial institution. For example, Bank of America limits transfers to $3,500 per day, while JP Morgan and Chase have a daily limit of $25,000 for personal accounts.

How much does it cost to accept ACH payments?

Different platforms charge different fees for ACH payments, typically a flat fee or percentage of each transaction. A 2022 survey found that the average cost per transaction was between $0.26 and $0.50.

Square

Square’s large menu of services and add-ons, paired with its low-cost versions for smaller or newer businesses and intuitive design, makes it the go-to credit card processing platform.

Its key differentiator is the free card reader it provides for processing in-person payments. Square charges a 1% fee (with a minimum of $1 per transaction) for ACH transactions and promises funds in three to five business days.

Read our full Square review.

Stripe

Stripe is a front runner for its ability to support international business and it can process 135 different currencies.

Its monthly fee is $0, and it stays that way with no hidden costs or fees. Instead, Stripe charges per transaction, with a higher online transaction fee than other competitors at $0.30. However, its ACH fees of 0.8% caps at $5, allowing you to transfer large payments for a very reasonable price.

Read our full Stripe review.

PayPal

PayPal’s commitment to security is its most standout feature. Every payment is encrypted and supported with:

Seller protection.
Buyer authentication.
Advanced fraud protection.
Chargeback protection.

PayPal also accepts digital wallets, which expands the ways in which your customers can pay for services. PayPal only offers ACH support for businesses in good standing, which also meet a few other requirements listed on their site. They must, for example, be located and authorized to transact in the United States and process payments with Braintree Direct.

Read our full PayPal review.

Featured credit card processing offers

Stax

Learn More

Via Stax’s website

Monthly fee

$99

Swiped transaction fee

7¢ to 10¢ + interchange rate

Merchant One

Learn More

Via Merchant One’s website

Monthly fee

$13.95

Swiped transaction fee

0.29% to 1.55% per transaction

Payment Depot

Learn More

Via Payment Depot’s webiste

Free Trial

Offers

$0 Setup & No Cancellation Fees

Pricing

Customized Interchange+ Pricing – Rates as low as 0.2% – 1.95%

Clover

Learn More

Via Clover’s website

Monthly fee

$14.95

Swiped transaction fee

2.6% + 10¢

Frequently asked questions (FAQs)

The best way to accept ACH payments is to use a payment platform that validates banking information, provides customers with an ACH mandate agreement and enables you to automate payments, minimizing the risk of human error.

While banking and routing information can be exchanged between individuals for a one-time payment, ACH is best suited to recurring transfers.

ACH payments pass through an ACH Operator to ensure funds arrive safely and on time. There are three key parties involved in an ACH payment:

Originating Depository Financial Institution (ODFI).
National Automated Clearing House Association (Nacha).
Receiving Depository Financial Institution (RDFI).

The payment process is started by the originator when they notify their bank (the ODFI) that a payment is due. The ODFI is whichever institution issues the ACH request. The ODFI submits a request for a funds transfer to an ACH Operator who sorts payment requests and makes sure they go to the correct institutions.

The ACH operator directs the request to the recipient’s bank, the RDFI. The RDFI is the institution that receives the ACH request. The RDFI then processes the request and withdraws payment from the recipient’s account. This entire process is overseen and regulated by Nacha, the National Automated Clearing House Association.

You can learn more about this process on Nacha’s website.

ACH payments typically take between one to four days to process, but Nacha cites that 80% of ACH payments are processed in one business day. Nacha also offers a Same Day ACH processing window, allowing payments to be transferred in as little as two hours.

ACH payments are one of the most secure payment options. All institutions processing ACH payments must follow the rules set by the ACH governing body Nacha. In addition to the secure way in which banking and routing numbers are exchanged, the organization has dedicated many resources to developing and upholding fraud detection and reporting.

If an ACH payment is returned, the ODFI will receive a code for the reason of return. The most common cause for return is that an account is closed or could not be found (i.e., there was an error in the account or routing number).

The return code will help you determine your next steps in securing payment or returning funds as appropriate. Work with your financial institution to investigate and manage any customer returns.

ACH payments that have not been processed or finalized can be stopped. For the specifics on how to stop an ACH payment, you’ll need to review your financial institution’s guidelines.

ACH payments and wire transfers are both kinds of Electronic Fund Transfers (EFTs). Both require senders’ and recipients’ bank account and routing numbers. However, wire transfers have more stipulations and rules and are more difficult to stop once they’ve begun. ACH transfers, in contrast, are slower but less risky because they can be stopped if an error is made.

While ACH payments are good for US-based businesses that want to automate billing or recurring charges, wire transfers are better suited to international business and transferring large sums of money.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

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Cat McAlpine

BLUEPRINT

Cat McAlpine is a writer and marketer based in Columbus, OH. She uses her expertise to support small businesses and arts organizations in her city.

Alana Rudder

BLUEPRINT

Alana is the deputy editor for USA Today Blueprint's small business team. She has served as a technology and marketing SME for countless businesses, from startups to leading tech firms — including Adobe and Workfusion. She has zealously shared her expertise with small businesses — including via Forbes Advisor and Fit Small Business — to help them compete for market share. She covers technologies pertaining to payroll and payment processing, online security, customer relationship management, accounting, human resources, marketing, project management, resource planning, customer data management and how small businesses can use process automation, AI and ML to more easily meet their goals. Alana has an MBA from Excelsior University.