1. What Is ACH, And Why Is It Important?
ACH stands for Automated Clearing House. ACH payments are electronic transfers from one bank account to another, almost exclusively within the United States.
They are facilitated by the Automated Clearing House network, a centralized payment processing network used by banks, credit unions, and other institutions to send and receive money.
The ACH network is monitored by National Automated Clearing House Association (NACHA), an independent association owned by its member institutions (banks, credit unions, and payment processors).
ACH payments are easy to set up. Accepting ACH payments is beneficial because it is a cost-effective way to process customer payments, especially if you regularly serve other businesses or bill customers.
If you sell services and bill for your work, ACH transfers are a great way to get paid. Likewise, if you make recurring payments, ACH is ideal. Customers only have to enter their information once, so it’s not tedious.
There are two types of ACH payments: direct deposit and direct payment. A direct deposit is an ACH payment from a business or government to an individual, such as a paycheck that is automatically deposited into your bank account.
On the other hand, direct payment is an ACH payment between individuals or businesses and consumers. There are two types of direct payments: credits (or deposits), or “push” payments, and debits, or “pull” payments.
Receiving money from a relative on Zelle or Braintree is an ACH (push) credit (push). On the other hand, a recurring bill withdrawn from your checking account each month, such as an internet or cable bill, is an example of an ACH (pull) debit.
As a retail business, if you pay your employees by direct deposit, you use ACH direct deposit. If, on the other hand, you have a subscription-based business, you bill your customers on an ongoing or subscription basis, you will probably want to use ACH direct payments, as they are more affordable than credit card processing fees.