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eChecks vs ACH: What’s the Difference?

19 August, 2022
6 min read
Brett Johnson, AVP, Global Enablement
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What you'll learn

  • Difference between eChecks and ACH payments
  • eCheck vs. ACH: Which payment method should you choose for your business?
CONTENT
What are eChecks?
What are ACH payments?
What is the difference between eCheck and ACH payments?
Which is the right payment method for your business?
Conclusion
FAQs
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You might have heard people use the terms like eChecks and ACH when it comes to payments, and wondered what’s the difference between them.

In both eChecks and ACH payments, funds are transferred from one bank account to another. Though both serve the same function,  there are a few  differences between eChecks and ACH. And knowing the differences between them can help you make a better decision about which payment method works better in different scenarios.

In this article, we will discuss both the payment methods and also guide you on how to make the right choice for your business.

What are eChecks?

eChecks or electronic checks are a form of payment where an individual initiates a transaction from one bank account to another via a digital version of a paper check. An eCheck payment is a one-time transaction that cannot be rolled back.

An advantage of eCheck is that it can be processed much faster than physical checks. Though you’re using the same account number and the bank’s routing system, processing eChecks is more efficient and quicker than physical checks.

How does eCheck processing work?

There are four main steps in eCheck processing. These are:

1. Authorization of the request

The customer needs to send an authorization request before initiating the payment to the merchant. This process can be completed through several mediums such as an online form, direct phone conversation, or signed order form. 

2. Setup of a payment gateway

After the authorization process is completed from both ends, you can now enter the payment gateway to initiate the process.

3. Submission of details

After all the information such as the account number, federal tax ID number, business name, and address is submitted correctly, you can complete the eCheck transaction process.

4. Confirmation of payment

The funds will be withdrawn automatically from the account of the customer after the transaction is initiated and will be deposited into the account of the merchant. It typically takes around 3 to 5 business days to reflect the transaction details in the account statement.

NOTE: Merchants will have to pay a nominal transaction fee in order to process eCheck payments.

Example of eCheck

(Source)

What are ACH payments?

Volume of ACH payments in 2021

ACH stands for Automated Clearing House, which is a form of transaction that allows merchants to send and receive payments electronically via the proprietary ACH network. The two types of ACH payments are ACH credit and ACH debit. Users mostly use this kind of processing for regular bills and utility payments.

The transaction speed and cost may vary for credit and debit types of ACH payments. Mostly, it takes around 1 to 2 business days to complete a transaction.

ACH payments are ideal for merchants who work on a subscription-type business model where they collect recurring fees from their customers. Such automatic payment deductions are categorized under ACH debits.

In the next section, we’ll look in detail at how the ACH payment process works.

How do ACH payments work?

An ACH payment gets completed in 3 steps. Here’s how:

1. Authorization request

The customer grants written or verbal authorization to the merchant for processing the payment.

2. Conversion of check into ACH

A payment gateway is used to convert the check into an ACH transaction. After this step is completed, the transaction goes to the merchant’s payment processor. 

3. Transfer of payment

After the conversion is completed, the merchant’s check processor sends the ACH transaction into the customer’s bank account. Once it is validated, the funds can be taken out from the checking account.

What is the difference between eCheck and ACH payments?

ACH is an electronic network that helps transfer money between bank accounts in the US. Though eChecks use ACH to debit funds from customer accounts to merchant accounts, there are some differences between the two.

The below table captures the differences between eCheck and ACH payments: 

eChecks ACH
Processing time 3-5 business days to clear the transaction  1 to 2 business days to clear the transaction
Cost $0.2 to $1.5 per transaction For business entities, it ranges from 0.5% to 1.5% per transaction
Supports Generally used for one-time payments. You can also set up recurring eChecks. One-time payments and recurring payments

Which is the right payment method for your business?

eChecks are a type of ACH payment that mimics the format of traditional checks and supports the latest data processing and security features. You can opt for either eChecks or ACH to receive payments if you are a subscription-based business. Using eChecks or ACH instead of paper checks reduces the overall operational hassle and is environment-friendly. Your customers won’t have to submit paper checks every month and rather can set up automatic deductions from their bank account. ACH payments are preferred for large transactions, recurring payments, and direct deposits.

When it comes to ACH payments, customer experience is also an added bonus. With all the ease and comfort that the customer gets from automatic payments, they won’t feel the need to go back to traditional payment methods again.

In other words, if you want to pick between ACH and eChecks for your business, keep in mind that both come with similar benefits—low cost, speed, and security.

Conclusion

As we discussed above, we can observe that eChecks and ACH payments are very similar, with only minor differences in their processing time and costs. In both forms of transactions, you must have the customer’s validation before the payment process starts.

eCheck is much faster and more efficient than physical paper checks and reduces the chances of fraudulent activities. An eCheck includes the latest form of technology, such as digital signature processing and authentication, end-to-end encryption, public-key cryptography, and many more. Thus, ACH and eChecks are easy-to-use digital payment methods, and businesses can choose either based on specific business needs.

FAQs

Question: How long does an eCheck take to clear?

Answer: In most cases, the funds are verified within 2 business days after the transaction has been processed, and are typically cleared within 5 business days.

Question: Is it time to integrate eChecks into your business payment options?

Answer: Customers are more inclined to spend their money and stay with the business if they have more choices of payments. By adding eChecks into your payment options, you will naturally expand the potential to increase your business’s revenue.

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