ACH Processing: Replacing Check Writing?

I belong to a networking group and have been told multiple times my monthly dues needed to be paid and I have to remember to bring a check. For those who refuse to adopt current forms of payment, there are ways that people can still pay by check but do so electronically. This process is called e-check and is facilitated by a process called ACH (Automated Clearing House), also referred to as ACH Processing.

ACH processing is only used in the United States and Puerto Rico. Similar systems exist in other countries, but they have different names and run on separate networks.

Many articles say this is a safer way of taking checks because you don’t have to worry about looking for forged or counterfeit checks. But one thing I learned the hard way is, if you are a merchant and you are using the ACH process you may be in for a huge run around if you have a chargeback. An ACH chargeback does not occur in the same way that a credit card chargeback occurs. A merchant’s bank account can be debited as soon as the consumer reports to their bank that they did not authorize the transaction. The difference is the merchant will not receive a letter requesting proof of the transaction before, or after, the debit occurs. Instead, the merchant will have to dispute the charge with the customer’s issuing bank directly. You may find yourself spending hours on the phone between the gateway, merchant services provider and the customer’s bank.

Another risk when running an ACH transaction is that the money can still remain in a customer account for 2 to 3 days after the transaction is run. This causes a greater risk for bounced checks. Fortunately, if one of your customer’s checks should happen to bounce, you do have some recourse. The most common thing to do is a “Re-Present”, this means to wait a few days and then run the check again. Also, it is generally a good rule of thumb to contact your customer and seek out another form of payment.

There are other options such as Real-Time Electronic Check Conversion. Merchants that receive a lot of bounced checks from customers can use this process to eliminate the high cost of NSF fees. Electronic Check Conversion gives the merchant the option of verifying that there are sufficient funds in the account to cover the check and eliminates the potential risk of a check bouncing. The check is scanned through a check scanner, much like those you may have seen at your local retailer, called an imager. The customer does not have access to these funds as they are on hold. There is a cost to running Electronic Check Conversion and it is typically a percentage of the total check amount.

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