EFT and ACH often need clarification, but they refer to different things. ACH is an umbrella term encompassing all ways of electronically moving money, while EFT is a specific type of digital payment.
Understanding the differences between ACH payments and other EFTs will make determining which method suits your business easier.
Cost
When it comes to cost, EFT and ACH are similar. Both types of transactions are digital transfers that move money from one bank to another, though EFT payments can be carried out within a single bank, while ACH transactions must first make a pit stop in the Automated Clearing House network.
Essentially, a direct deposit from an employer to an employee is an example of an ACH payment. The same goes for consumers sending money to friends via a payment app. On the other hand, EFT payments are more broad in scope and typically encompass any digital transaction between businesses and consumers. This includes everything from payment apps to debit card and ATM transactions.
The good news is that ACH and EFT are far cheaper than credit cards when making or receiving payments. However, it’s important to note that ACH payments are processed in batches, while credit card transactions are usually completed as individual transactions.
Ultimately, when choosing a payment method for your business, you’ll want to weigh each option’s pros and cons. It’s also crucial to ensure that the electronic payment technology you choose integrates with your existing accounting software so your accounts team can keep up-to-date on all transaction activity.
Convenience
Many business owners and consumers use the terms “EFT” and “ACH” interchangeably, but it’s essential to understand the differences between these two types of payments. While EFT and ACH are both types of electronic funds transfers, they’re very different from each other in how they’re used and the fees they’re charged.
ACH is a payment network based within the United States and interlinked through thousands of financial houses. This network bundles many transactions and then releases them at fixed times each day. Depending on when a transaction is released, it can take up to three banking days for an ACH debit payment or five for a credit payment to clear.
On the other hand, the EFT network is designed to handle a larger volume of recurring transactions with incredible speed and accuracy. It’s essential to weigh the convenience of EFT vs. ACH when choosing an automated billing system for your business.
Another consideration is whether a payment system will allow you to accept other e-payments like credit card payments and wire transfers. These payment methods are more convenient than ACH payments because they’re processed instantaneously in real-time. However, they come with security challenges and require special PCI compliance training. You should also carefully compare each fee to ensure you’re getting the best value for your money.
Security
While sharing bank account information with businesses might feel precarious to some, it’s quite secure. EFT and ACH transactions are regulated by the Electronic Funds Transfer Act, which protects consumers from any unauthorized funds transfers that might occur. In addition, you have 60 days from the transaction date to report an unauthorized payment.
Whether you’re paying for a service or buying something from a company, the chances are high that you’ve used an EFT in some form or another. EFT is a broad digital payment category that includes ACH, wire transfers, instant eWallet payments, and more. ACH is a specific type of EFT regulated by the National Automated Clearing House (NACHA) network.
The most common ACH payment involves direct deposits. For example, receiving your tax refund or paycheck via direct deposit is an ACH payment. The ACH network also handles payments for social security benefits, employer-reimbursed expenses, and annuities.
Unlike credit card transactions, which typically have a percentage and fee, ACH transactions have only one charge per payment. That makes it cheaper for merchants to process these transactions, especially recurring ones. The only drawback is that ACH transactions take longer to complete because they are batched rather than processed individually, like credit card payments. However, the system that processes ACH payments is getting faster and quicker every year.
Time
There are numerous reasons to support ACH payments, including the ability to save your business time and money. For example, ACH is the lowest-cost transaction method compared to paper checks and credit card transactions. And because ACH is automated and paperless, you can save time on processing and record-keeping.
Another way you can save time with ACH is by using it for recurring billing. This can help you streamline your payments process, freeing time to focus on other aspects of your business. And because ACH is a secure, reliable form of payment, you can reduce your risk of fraud or lost funds by ensuring the security of each transaction.
One final point to note is that ACH transfers are batched together and occur slowly compared to other electronic transactions, like ATM withdrawals or credit card purchases, which can be instant. However, ACH payments are still faster than sending a check in the mail or making a cash payment.
When deciding what kind of EFT payment solutions to offer your customers, consider each option’s costs, speed, and security parameters. And be sure to look for an intelligent business payments platform that seamlessly integrates with your accounting software, so you can spend less time on billing and more on growing your company.
