ACH Processing and Recurring Payments: Match Made in Heaven
ACH Processing and credit card processing both have pros and cons.
The big plus for credit cards is the ability to know at the time of the transaction that the purchaser has the requisite funds and these funds WILL be paid to the merchant. For many merchants that operate in a one-time sales basis,especially via the Internet or Phone, the surety of receiving payment is the primary concern. The fact that they may be paying close to 3% of the transaction amount in fees is mitigated by knowing you have a sale.
In the ACH world there is no corresponding real-time funds authorization component so a merchant shipping product may need to wait 48 hours before shipment to ensure payment cleared. For many merchants this delay is not worth the substantial savings [90% +] the ACH transaction offers.
When risk of non-guaranteed payment is substantial many businesses prefer the safety of credit cards over an ACH. However recurring billing presents much less risk. Any business that has some kind of continuity billing eg membership/ongoing services/rent etc knows their client base. ACH transactions that reject [typically .5-2% range] can be dealt with automatically and because there is a connection with that client there is means to maintain the billing arrangement. Credit card payments reject as well [customer late with card payment or over limit] and the merchant must deal with these as well.
Recurring Billing via ACH offers compelling advantages. Look at the merchant billing $100/month. Via credit cards that client will likely cost the merchant over $30-$40/year in credit card fees. Contract with $3-$4 via ACH. If you bill 500 clients you have saved $15,000 per year[monthly billing].
ACH processing originated as a recurring billing solution and is an excellent tool for businesses to automate payment collection in an extremely cost effective manner. Contact us for more info.
