The Benefits of ACH Payments and Why Businesses Are Making the Switch

Credit cards might be the go-to for many companies, but the hidden costs and chargeback risks can add up fast. If you’re looking to tighten your budget and improve cash flow, ACH payments could be your secret weapon. In this blog, we’ll break down how bank transfers work, why they’re more secure, and how they can save you money in the long run.

Understanding ACH Bank Transfers

Before we take a closer look at the benefits of ACH payments/bank transfers, let’s start by getting a basic understanding of them:

What Is ACH?

ACH stands for Automated Clearing House, which is a system used to move funds electronically between bank accounts in the United States. Instead of relying on physical checks or credit card networks, ACH payments travel through a network that processes large volumes of direct deposits and payments in batches. If you’ve ever gotten your paycheck through direct deposit or paid a bill automatically from your bank account, you’ve likely used ACH without even realizing it.

ACH transfers come in two main forms:

• ACH Credits: Funds that a business, organization, or government entity sends to a recipient’s bank account. An example is a company paying employees directly or issuing a refund to a customer.
• ACH Debits: Funds that are pulled from a payer’s bank account by another party, usually with authorization. An example might be a subscription service billing you monthly for a streaming membership.

Because the process is electronic and relies on bank routing information rather than credit card details, many businesses find ACH simpler and less expensive than other payment options. The system itself has been around for decades, proving it’s a stable, reliable method for handling financial transactions.

Why Credit Cards Are So Popular

Before we explore why businesses might switch to ACH, it’s worth considering why credit cards have become the go-to. The biggest draw is convenience. Consumers are used to paying by card, whether online or in person, and many appreciate the rewards programs associated with credit card spending. There’s also a sense of security that comes from zero-liability policies, which protect customers from being on the hook for fraudulent transactions.

From a business’s perspective, accepting credit cards can feel like a no-brainer because it’s what customers expect. Not offering them may risk losing sales, especially if a major chunk of your audience prefers to pay by card. Yet this convenience doesn’t come without costs—fees, chargebacks, and higher fraud risk can all chip away at a business’s bottom line. As the landscape of digital payments evolves, many companies are looking beyond credit cards for ways to save money and reduce hassles.

The Fundamental Differences Between ACH and Credit Cards

When a customer pays with a credit card, the process typically involves instant authorization. The card network (like Visa or Mastercard) checks the buyer’s account, approves or denies the transaction, and then the merchant receives funds after a settlement period—usually a couple of days. In contrast, ACH payments don’t happen in real time. They operate in batches, which means transfers are processed at specific intervals throughout the business day.

• ACH: Funds might take one to three days to fully settle. This is because the bank waits to confirm that the payer’s account actually has the necessary balance.
• Credit Cards: Transactions are authorized almost immediately, but settlement (when funds officially reach your merchant account) can also take a couple of days.

The slower processing time for ACH might sound like a drawback, but it can actually streamline certain types of transactions—like recurring payments or large invoices—where immediate authorization isn’t always a priority. This is especially true for business-to-business (B2B) payments, where large sums of money need to move without incurring huge credit card fees.

Fee Structures

One of the biggest differences between credit cards and ACH is how much they cost to accept. With credit cards, you’ll likely pay a percentage of the transaction—anywhere from around 2% to 4%—plus a fixed fee for each sale. Over time, that can add up significantly, especially if you’re dealing with high volumes or large-ticket items. ACH, on the other hand, often charges a flat fee or a much smaller percentage than credit cards. Some banks or payment providers may even set a maximum cap on ACH fees, making it especially cost-effective for high-value transactions.

For example, if you’re selling a $1,000 product, a 3% credit card fee means $30 goes to the payment processor. If your ACH fee is a flat $1 or even $5 per transaction, you save a considerable amount. Multiply that across hundreds or thousands of transactions, and you can see why many businesses are reconsidering how they bill their clients.

Security and Fraud Risks

Card fraud is a well-known problem. Criminals can steal card numbers or skim details during unauthorized transactions. ACH isn’t immune to fraud, but it presents different hurdles for would-be thieves. Fraudsters need a specific bank account and routing numbers, and unauthorized ACH payments are generally easier to track and reclaim than card-based transactions. Additionally, ACH disputes tend to be handled differently, often requiring the consumer to prove the payment was unauthorized rather than the merchant needing to fight a chargeback in the same way credit card disputes happen.

Another security perk is that ACH data typically changes hands fewer times. With fewer intermediaries, there’s a lower risk that data gets intercepted. That said, ACH still needs robust security measures in place, like strict authorization processes and strong data encryption. In many cases, the inherent design of the ACH system reduces some of the more common types of fraud that plague credit card transactions.

Cost Comparisons and Operational Benefits of ACH Payments

Let’s dive into a cost comparison analysis of ACH payments vs. credit cards and examine the operation benefits of ACH payments:

Lower Transaction Fees

The most obvious motivator for switching to ACH is saving on transaction fees. For businesses with high average order values or recurring subscriptions, the difference between a small, flat fee and a typical credit card charge can be substantial. Even if your sales are smaller, a consistent stream of transactions at 3% per charge can steadily chip away at your profits.

These cost savings often become more apparent as your volume grows. The difference between a $2,000 credit card transaction and a $2,000 ACH payment could be significant enough to reinvest in marketing, employee salaries, or other growth-oriented initiatives. Reducing friction at checkout doesn’t just affect your relationship with customers; it also impacts the resources you have to keep improving your products and services.

Chargebacks and Disputes

Chargebacks are a fact of life with credit cards. Customers can dispute a transaction for reasons ranging from actual fraud to simple dissatisfaction with a purchase. Handling these disputes can be time-consuming and sometimes confusing. You might have to gather evidence, communicate with payment processors, and wait weeks—or even months—before the matter is resolved.

With ACH, the dispute process is different. While unauthorized ACH transactions can be reversed, it’s not as straightforward for consumers to dispute an ACH payment as it is with credit cards. This can mean fewer unexpected losses for your business and less administrative work dealing with back-and-forth documentation. Of course, you’ll still need to address valid customer concerns, but you’re less likely to be blindsided by chargebacks that come out of nowhere and freeze your funds.

Real-Time Bank Transfers and Cash Flow

In recent years, the concept of real-time bank transfers has gained momentum. While traditional ACH might take a day or two to settle, newer services within the ACH framework or additional fast-transfer platforms are shortening those timelines. Some solutions can even deliver funds within hours, which is a game-changer for businesses that rely on steady cash flow.

Being able to access funds more quickly can reduce reliance on credit lines or other forms of short-term financing. When money from sales hits your account sooner, you can reinvest in inventory, pay suppliers, and manage your budget with greater precision. Faster access to cash also means you’re better prepared for emergencies or unexpected expenses, reducing the financial strain that slow settlement times can cause.