Check 21 Payment Processor

Check 21 Payment Processing

If your business exceeds the ratios for returns and revokes required by the ACH network, Check 21 is a good option for you. Check 21 is a broad term used to describe processing which clears transactions through bank-to-bank file transfer rather than through the ACH network.

Check 21 and ACH are both used for web and phone transactions as well as one-time and recurring debits from bank accounts. The user experience for Check 21 and ACH is the same. Customers pay you with an echeck by providing bank routing and account numbers rather than card information.


What is Check 21?

Check 21 was initially used to scan paper checks to electronic images in a process called remote deposit capture (RDC),  Today, many banks let you take pictures of a check on a smart phone & deposit the check electronically. 

The use of Check 21 has changed in the last few years to include processing transactions which are initiated by the consumer in an electronic fashion rather than with a paper check. 

When shopping for Check 21 processors, it’s important to understand the check clearing process being used on the back end.  Since Check 21 is a generic term, you need to determine whether the check clearing process will work well for your business.

For example, high risk merchants have far different requirements for electronic check processing than do low or standard risk merchants.

Check 21 for High Risk Merchants

Clearing Check 21 transactions through a processor’s account is the preferred solution for high risk merchants.  NationalACH is one of the only companies in the US that offers this unique service.   

Merchants are classified high risk primarily due to the risk of increased returns or revoked (chargebacks) transactions.  Clearing check transactions through the electronic check processor’s account allows for far higher ratios for chargebacks and returns than any other electronic payment method. 

All returns & revoked transactions are cleared back to the processor’s account. The processor assumes the liabilities for returned & revoked transactions instead of you.

Funds for cleared transactions settle to your bank account, similar to the way card payments are settled.  The only transaction your business bank sees is an ACH credit of the settlement funds.


Substitute Checks Do Not Work for High Risk Merchants

Many Check 21 processors simply create “substitute checks” which are sent to your business bank for clearing.  This works only if your revoked and returned transactions are extremely low, which is seldom the case for high risk merchants.

Substitute checks can be effective for low risk businesses. For example, utilities, insurance, or online bill pay companies have very low return rates or revoked transactions. People rarely bounce electronic checks used to pay household bills  Revoked transactions seldom occur since consumers do not dispute electric, water, gas, mortgage payments, car loans, or other bills. 

However, for standard and high risk companies, substitute checks are not a good option.  When your business bank sees returns and revoked check transactions running through your business operating account, the account is red-flagged.  And often results in the business operating bank account being terminated.    

Additionally, some major US banks do not accept substitute checks and automatically return them as “Return to Maker”. As a result, more returns flow through your bank. And further jeopardize your business operating account. 

How Check 21 Compares to ACH

ACH is a good solution for merchants that can comply with the rules of the ACH payment processing.  With same day ACH, payments can be processed faster than ever before.

The issue with ACH for many standard and high risk merchants is that revoked transactions cannot exceed 0.5%.  This is half the number of chargebacks permitted by the card brands.  It’s very challenging to stay compliant with ACH guidelines for revoked transactions, even for standard risk merchants. 

However, ACH echecks are a great solution if your revokes are less than 0.5% and returns are under 15%.  ACH is reliable, inexpensive and is a better solution than substitute checks for low & standard risk merchants that comply with ACH requirements. 

What Form of Check21 is Right for Your Business?

If you are processing paper checks, converting the checks to electronic format via RDC and clearing through your business account is a good solution.  Images of paper checks which are signed are accepted by all major US banks.  It’s very inexpensive and extremely low risk.

Substitute checks may work for some low risk merchants but offer few benefits over ACH payment processing.  Substitute checks are seldom a good fit for standard risk merchants.  And substitute checks never work for high risk merchants. 

If you are a low or standard risk merchant with low returns or revoked transactions, same day ACH echecks are preferable over substitute checks.  ACH check clearing is extremely predictable, reliable & quite inexpensive.  Same day ACH is now available, making ACH payments faster than ever. 

If you cannot qualify for ACH due to higher returns or revokes, use a payment processor that clears Check 21 transactions through its own account then settles cleared funds to you.  This is the option of choice for high risk merchants. 


Applying for a Check 21 eCheck Merchant Account

Applying for an account is straight forward.  You submit application along with supporting documentation. Account approval takes 3-5 business days.

Supporting documents include: Color copy of ID for signer on account, bank statements, processing history, voided check from depository account, and business formation documents.

It’s helpful if the signer on the account has good personal credit.  If credit is not good, adding a co-signer with good credit will help get the account approved. 

Once the application package is received, the underwriting team verifies the information on the application form.  Then, supporting documents are reviewed.

If you have a website, go through the site and confirm all pages are displaying properly.  Clearly display privacy, returns, shipping, customer service contacts and other pertinent information. 

For merchants without websites, include marketing materials, pricing lists, sample of sales agreements or an executive overview in your application package.  This helps underwriting understand what is being sold and the terms associated with the purchase.

Underwriters may conduct internet searches for reviews on a company or owners.  During the application process, do a search yourself so you’ll know what’s out there.  Naturally, few companies have perfect reviews.  Still, if you encounter negative comments, do your best to respond in a polite & professional manner, demonstrating that you care about customer service.

Once Check21 merchant account is approved, a merchant account ID will be issued.  And you can start processing immediately.


Accept Check 21 Payments Through All Sales Channels

Check 21 payment processing can be used to accept payments through all sales channels.  The more ways you accept payments, the more orders you will receive.

Integrate Check 21 payments with your website.  A simple-to-install API connects your website to the secure banking network.  Easily accept orders online or from mobile devices.

For merchants that accept mail & phone orders (MOTO), unlimited virtual terminals are included with all Check 21 merchant accounts.  Customer service representatives enter the orders through any internet enabled computer.  The Check 21 payment gateway ensures secure transmission of all data. 

For businesses that process bulk orders, files are securely batch processed.  This is a good solution for high volume processing of large order files. 

Convenient online cloud reporting is a standard feature for all accounts.  Easily track all transactions in real time.  Management reports are customizable and available in a variety of formats.

Transactional data is simple to import and export to your internal business systems. Smooth exchange of payment data streamlines business operations and enhances productivity.


Why Choose NationalACH for Your Check 21 Payment Processing? 

Below are a few of the many reasons businesses chose to work with us:

  • Free application with no-obligation. Our primary mission is for you to obtain the lowest rates, fastest approvals and best terms.
  • Extensive banking network. Ten financial institutions are connected to Check 21 high risk payment processor.  Ensuring high capacity processing capacity and mitigating the risk of depending on a single bank.
  • High volume merchant account specialists. Get the processing capacity needed to accommodate your business growth. Once approved, you can process as much volume as you require.
  • Superb customer service. Highly trained representatives dedicated to your total satisfaction.
  • Account verification. Check verification prior to submitting transactions keeps returns low.  Saving you money.  And ensuring more good orders.   
  • High risk merchant accounts. Check 21 payment processing for all businesses, including those classified as high risk.
  • Fraud prevention tools. Get more good orders.  Decline bad ones.  Set aside questionable transactions for review.  

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Contact us at 855-562-ACH2