ACH or Credit Cards?
by Wayne Akey
Published on this site: August 10th, 2005 - See
more articles from this month
Most businesses accept credit cards and consider the processing
fees a cost of doing business. However by implementing an
ACH payment system you can realize dramatic savings and increase
sales.
ACH refers to the Automated Clearing House and generically
means moving money electronically to and from checking and
savings accounts. An example would be a check by phone or taking recurring payments directly
from a checking account.
The MAJOR difference between ACH and credit card processing
is that a credit card transaction "captures" the
merchant's funds from the consumer and essentially guarantees
payment. An ACH transaction is a request to transfer funds.
The transaction may reject for several reasons with the most
common being NSF (non sufficient funds) or a closed account.
The funds are not guaranteed.
It is the guarantee piece that allows the credit card company
to charge a percentage of the transaction to cover the risks
involved. Typically a transaction will consist of a discount
rate, 2.5% for example and a transaction fee, typically in
the 30 cent range. This means that every $100 processed incurs
about $2.85 in merchant fees.
Contrast this with an ACH transaction. Typically there is
no discount rate just a .30 (or less) transaction fee. If
you process $25,000 per month using ACH processing you will
save around $7500 per year. Certainly you will have more "failed"
sales due to ACH transaction rejects (eg NSF) but your transaction
savings will far exceed these losses. In addition you will
appeal to a much wider range of consumers. Estimates vary
but MANY people do not have credit cards or are at their limit
on their cards. So the benefits are two fold-much reduced
transaction fees and a new payment vehicle for your customers.
So consider ACH processing for your business. It will save
you money and win new customers.
Wayne Akey has helped numerous businesses save time
and money with ACH processing. Get your free report on how
your business can benefit http://www.ach-payments.com/software/secrets.doc
or
visit http://www.ach-payments.com
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