What about payment by ACH?

I have found fees as low as 29 cents per transaction

[tootalldave]

What about payment by ACH?
We have been considering this method.
It appears to be very cost effective, I have found fees as low as 29 cents per transaction (echeck).
This is very low compared to credit cards.
The transfer time is about 2-3 business days from your customers account to yours.

From what I have read, there are many that don't have credit cards or they are maxed out, where over 82% of households in the US have checking accounts.

For those who don't know what ACH is...
AUTOMATED CLEARING HOUSE (ACH) – A funds transfer system, governed by the NACHA Operating Rules, that provides for the interbank clearing of electronic entries for participating financial institutions. (NACHA)

Layman terms:
Transfer of money from your customers checking account to yours.

[sun818]

Unless you have subscriptions or long-time customers, ACH does not seem like a method customers like to use. I've been offering electronic check for many months and have not had much participation. Why participate when you have none of the protection or ease of use as a credit card?

You do not incur a processing rate fee along with the $0.29 transaction fee?

[Corey Bryant]

ACH can be good at times but also keep in mind that people can write you a "hot check". It is not exactly like having the money in your bank account

-Corey

[ceestand]

I deal with ACH in my day job. There are a host of issues compared to credit cards. For one, you don't get instantaneous payment, so if you are providing the customer with an item, you'll have to wait a bit to make sure the payment doesn't bounce. There are other issues with the time a customer gets to challenge the ACH. The ACH Wikipedia article actually doesn't have a half bad explanation of this.

Most importantly though, I might give out my ABA and account numbers to a bank or the government, but not to some guy's website.

[Tonearm]

Really? So even if the ACH payment is "authorized" it can still be rejected a few days later (after the goods have been shipped)?

[ceestand]

Yes, it takes some time to process the payment. The time it takes may differ depending on your ACH provider (our "uncertain time" if you will, is about three days).

However, also like credit cards, consumers can dispute payments and have up to 60 days to do so.

[ceestand]

Let me clarify my last post to yours:

An ACH payment is not actually authorized like a CC. You submit a transaction for processing and wait to hear back if it went through. Because of the different banks and processing companies involved, it takes time. In my experience, it takes a few days. Let me know if you find something faster.

So, you could accept the customers' order and wait to get the transaction back before sending the order out. In that respect it's almost a CC/Check hybrid. If you get it back "approved", you have the money. Unless the customer disputes the debit to their account.

So if you're willing to put an order in limbo until the ACH transaction comes back, it could be used as a substitute for credit cards. Let me reiterate though, that (smart) consumers are not apt to providing their banking information online...

[Tonearm]

When I started my business I accepted personal checks. I called my bank to find out how long I needed to wait for any given check to clear before I could ship the merchandise. The answers I was given by a couple different people indicated that there really was no definite period of time, and the last thing I was told was that it could still bounce "30 days or more" after the deposit. I don't accept personal checks any more.

Do you think ACH could work that way, or is 3 days a pretty solid number?

[edited by: Tonearm at 5:42 pm (utc) on Sep. 5, 2007]

[ceestand]

I think it mostly depends on the customer's bank. Three days is average for us, but I believe five is on the long side. It might be less with favorable circumstances, like the company and customer bank with the same entity. Certainly much shorter than paper checks. I would say 99% of the time you have the money in 5 business days or less.

If you were looking to replace checks with ACH, I think it's doable and probably a good move. Replacing CC with ACH I think is not worth it. I think the customer would be willing to absorb the extra dollar or two in order to have their product that much faster.

[Tonearm]

Thanks ceestand.

Is anyone using ACH that can comment on how often customers use it compared to other payment methods?