How Rates are Set for ACH Processing

How Rates are Set for ACH Processing

What is an ACH Processing Account?

An ACH account enables you to direct debit funds from buyers’ checking or savings accounts and electronically transfer the funds to your business bank account.   

An ACH account captures sales from customers who do not have cards, are maxed out on cards, or who simply prefer to pay using ACH direct debit. 

Adding an ACH account to payment processing increases profit margins and reduces costs.

Three Elements in ACH Rate Structure

There are three elements in determining the pricing structure an ACH account.

1.      Type of transaction being processed through the ACH account

2.       Industry classification of the business establishing the ACH account

3.      Product or service being sold through the ACH account

Classifications of ACH Account Transactions

Classification of transactions associated with an ACH account is based the way in which consumer authorization is received.   Will the merchant receive written ACH account authorization?  Or will the merchant be accepting ACH account transactions online or over the phone?

Written ACH account authorizations received from customers for direct debits are considered low risk transactions and rates are correspondingly low.  Written authorizations are difficult to revoke because the there is a signature on file for the ACH account transaction.

For example, most people have written authorizations in place allowing an ACH account transactions to direct debit bank accounts for car payments, insurance premiums, rent or mortgage, utility bills and recurring payments for health clubs and other membership or subscription based services.   All of these would be considered low risk ACH account transactions

It is unlikely that a consumer will revoke a low risk ACH account transaction that has been authorized in writing.  As a result, rates for ACH account transactions with written authorizations have low, flat rate fees.   The exact rate charged for an ACH account transaction is based on the number the number of transactions processed each month.  The more transactions that flow through an ACH account, the lower the rate.

ACH account transactions initiated online or accepted by phone without written authorizations carry a higher risk since there is no written authorization in place.  Rates for these types of transactions can be higher than for written authorization, but this is not always the case.

For example, billers who accept ACH account transactions for online payment of rent, utility bills, tuition, car payments, and similar types of transactions at the biller’s website may still be charged low flat rates.  These types of ACH account payments, whether made online, by phone, or by written authorization, are seldom revoked by consumers.

Businesses selling products or services online or accepting ACH account transactions by phone may or may not have higher rates.  Much depends upon the types of product and service being sold and the industry classification of the merchant with the ACH account.

How Products/Services Relate to Rates

Some products and services sold online are low for ACH account transactions because there is not much chance of consumers revoking the transaction.  For example, a well-established internet retailer selling moderately priced items often can take advantage of flat rate pricing for ACH account transactions.  

Other products and services have a higher chance of consumers revoking a transaction.   In these cases, an ACH account transaction will be priced at a higher flat rate transaction.  Or, the ACH account provider may add a discount rate in addition to a transaction fee.

High Risk ACH Accounts

Certain merchant categories are considered high risk for an ACH account.  Common high risk merchant account classifications for an ACH include adult entertainment, travel, electronics, jewelry, virtual goods, tickets, dating, software and games.  Merchants in these categories experience a statically greater likelihood of consumers revoking an ACH account transaction.

High risk merchants can certainly take advantage of ACH account transactions to increase sales.  Rates generally include a discount rate along with a flat rate transaction fee.  Discount rates for a high risk ACH account generally range from 1-3%.  The specific discount rate associated with a high risk ACH account depends on the underwriting criteria of the ACH account provider.


Regardless of rate structure, an ACH account always cost merchants less than credit card processing fees.  You can save 50-95% for ACH account transactions compared to rates for the same transactions processed with credit cards.

Are you interested in increasing sales & profits with ACH payment processing?

Contact today

What is ACH Payment Processing?

What Is ACH?

An ACH merchant account is an excellent alternative to card payments, allowing you to capture sales from customers that do not have cards, are maxed out on cards, or simply prefer to pay with an electronic bank transfer.  

ACH rates are also often significantly lower than rates for processing cards.  Which results in savings on payment processing costs while helping reduce fraud & chargebacks.  

The Automated Clearing House Network (ACH Network) provides the framework necessary for the processing of ACH payments, a type of transaction that is increasingly popular across the United States.  ACH electronically debits money from your customers’ bank account and automatically credits the funds to your business bank account.  

History of ACH 

Looking at the history of the National Automated Clearing House Association (NACHA), one immediately sees a continuous drive for innovation and expansion. The foundations of the network were set in 1974 when several ACH associations formed NACHA, and only four years later, as additional rules and regulations were put into place, it became possible for any two financial institutions across the United States to process this type of payment.

Over the next three decades, the institutional framework of NACHA was further developed, an evolution that paved the way to the implementation of internet and telephone-initiated payments (2001) and international payments (2009). The network now has the capacity to process both one-time and recurring transactions.

Simple Way to Collect Payments

The mechanism behind ACH payment relies on the exchange between an Originating Depository Financial Institution (ODFI), which can be either an individual, corporation, or some other entity, and a Receiving Depository Financial Institution (RDFI). The ODFI will enter an ACH entry according to instructions, and an entire batch of such transactions will be submitted at specific intervals to an ACH Operator. The last step is carried out by the ACH Operator that will assign the transactions to the appropriate RDFI.

ACH Shapes the Future of Payments

By the late 80s, the ACH network processed around 1 billion transactions on a yearly basis. The constant expansion of the network and growing popularity of the payment method made possible the processing of 22 billion transactions in 2013 alone.  NACHA publishes detailed statistics for each quarter that show the upward trend of the ACH volume overall and for specific segments. The most pronounced growth for 2014 were registered, among others, by web transactions and recurring payments. Today, the ACH network processes around 20% of the entire electronic transactions volume in the United States.

The future of ACH payments is more promising than ever. NACHA has been preparing assiduously for the gradual introduction of Same-Day ACH – a feature which will considerably decrease the settlement time of ACH payments. All parties involved, including websites that sell online, will benefit immediately from the introduction of Same-Day ACH by having the opportunity to access funds and make the delivery of their products and services faster. Since expediency is paramount in the online ecommerce industry, there has never been a better time for implementing ACH payments on your website.


ACH payment processing is a cost effective method to send and receive payments.  Benefits include:

  • Increased sales.  The more way customers can pay you, the more more money you make.  
  • Lower processing fees.  ACH processing rates are significantly lower than card payments fees.
  • Easy and simple way to send and receive money safely.

Interested in finding out more about ACH payments?  

Contact today

Recurring Payments & Subscription Billing

Echecks for Recurring Payments

In recent years, ACH payments have experienced continued growth.  A large part of the grwoth curve is due to the increasing popularity of recurring payments.

The results released by the National Automated Clearing House Association for the first quarter of 2015 confirm this trend. The network processed 4.82% more recurring payments compared to the same quarter of the previous year.

Advantages of ACH for Recurring Payments & Subscription Billing

Collecting recurring payments for subscription-based services through the ACH network has some key advantages over other payment methods. Relying exclusively on cards for recurring payments creates revenue leakage that could be prevented with ACH payments.  

Credit cards expire, have spending limits the customer may not be aware of, and are vulnerable to loss and fraud. As a result depending on card payments for recurring payments can result in discontinued services, customer complaints, and decreased profits. These consequences can be damaging for a business that relies on customer retention and consistent cash flow for success.

Accepting ACH payments for subscription billing removes these challenges. Since the amount is debited directly from the customer’s checking or savings account, recurring payments continue without interruption.  

Customers who do not feel comfortable with providing the card information and who do not have cards find it convenient to pay with an electronic check. And if a card is declined, offering an echeck payment method can save the sale.  

An additional advantage of accepting recurring payments through the ACH network is the reduced costs. While credit card payments are more expensive because of the notoriously sophisticated interchange fees, the ACH network does not have such fees. As a result, the merchant that accepts ACH payments will make a profit from both an improved authorization rate and lower payment fees.

ACH Still Not Real Time

Although NACHA is moving towards same day settlement, it is still not a reality.  For the present time, ACH processing is not “real-time” in the same way as cards.

With a card transaction, funds are frozen for a particular payment.   For ACH payments, items clear daily through the Federal Reserve midnight.  Therefore, there is always a small chance the funds for the ACH debit will no longer be available to cover the transaction.

It may take up to 24 hours until a merchant finds out that the amount cannot be charged due to insufficient funds. Therefore merchants selling tangible products are prudent to wait a day before shipping to be sure the payment clears.

Merchants who sell products and services that are delivered electronically need also take  this into consideration before implementing ACH payments. For small ticket sales of digital goods, the benefits of increased sales far outweigh the risks.  


The rewards of using ACH for recurring payments and subscription billing far outweigh the risk. 

Once bank accounts are established, they rarely change. Recurring payment continues uninterrupted, with no need to update recurring billing information.

Compare this to cards.  

Each year,  1 in 5 cards are reissued. Each time a card is reissued, you have to update payment information. Which is time-consuming and expensive. And gives customers an unnecessary reason to cancel. 

ACH payments are steady and consistent over time, generating you more revenue. Increasing the lifetime value of customers. And protecting your cash flow from recurring payments.

Do you want to add echecks to protect cash flow from recurring payments? 


Echecks for Recurring Payments

ACH for high risk merchants is an easy way to get more sales from recurring billing models and subscription sales. High risk merchants in many industries, including online entertainment, digital content, and subscription-based products benefit from ACH processing.

ACH stands for Automated Clearing House.  The ACH payment processing network is the oldest and most reliable payment system in the US.  

With ACH echecks, customers pay you directly from bank accounts.  The money is automatically transferred from the buyer’s bank account and deposited into your bank account.

You can accept ACH payments on your website or by telephone.  Integration of ACH echeck processing to your website is done through a simple API interface.  Check by phone and mail orders can be entered manually using a virtual terminal that connects to the secure banking network.

Advantages of ACH Payments for Recurring Billing

Consumers rarely change bank accounts.  Most Americans have payroll directly deposited into their bank accounts and pay monthly bills from their online banking.   Changing a bank account is simply too much of a hassle.

When a recurring payment is made via an ACH merchant account, cash flow remains stable over time.  Customers get used to seeing the transaction on their monthly statement and continue to pay you month after month.

Card processing for recurring payments is different.  Every year one in five cards get reissued.

If you follow the news, you have seen many stories on the security breaches that have caused the re-issuing of cards. Perhaps you’ve even been one of the millions affected.  In addition, cards get reissued if they are lost or when expiration dates expire.

Every time a time card gets reissued, you need to update the recurring payment information.  Which means you either have to contact the customer or have the customer contact you.  It can become a nightmare to manage.  And until the new payment information is received, you are losing revenue.

With ACH echecks, the lifetime value of your customer is increased.  You make more money.  And eliminate the need to continually update payment information.


Millions of Americans pay for goods & services with echecks.  

ACH payments are more effective than cards for recurring payments. Every year 20% of cards are reissued.  Meaning you have to update card information for a recurring card transaction to be approved.  

Consumers rarely change bank accounts.  It’s simply too much hassle. Recurring payments continue uninterrupted. Protecting your cash flow & profits.

Interested in protecting your recurring payments cash flow?

Contact info@NationalACH today.

5 Benefits eChecks for High Risk Merchants

High Risk Merchants Move from ACH to Echecks

High risk merchants will tell you how challenging it is to remain compliant with restrictive ACH payments processing regulations regarding chargebacks on echecks. 

It is virtually impossible for many high risk merchants to comply with rules demanded by NACHA , the governing organization for ACH payments, which require chargebacks stay under 0.5%.

Echecks  process through bank-to-bank transfers.  Bypassing the ACH network completely.

Because  echeck transactions do not process through the ACH network, high risk merchants do not have to comply with restrictive ACH regulations.  Giving you much greater flexibility on chargebacks.

Top 5 Benefits of eChecks 

  • eChecks Clear Quicker.  Electronic checks through the Federal Reserve on either the same day or next business day depending upon when the file is submitted.  Much faster than the 3 day clearing time for ACH transactions.
  • More Banking Coverage.  Echecks cover more bank accounts than ACH processing.  Electronic check payments can be deducted from all financial institutions covered by the ACH network plus credit unions, brokerages, savings & loans, and smaller banks which the ACH network does not include. 
  • Rapid Notification of NSF.   Since Check 21 echecks clear fast, you are quickly notified if funds are not available.  And, shorter clearing times offer you better protection against fraudulent echecks transactions.
  • Get rid of ACH Network Restrictions.  Echecks are not subject to NACHA regulations which limit chargebacks to 0.5% and returns to 15%.  With echecks, you have far greater flexibility on returns and chargebacks.
  • Decreased Risk  It’s harder for customers to dispute transactions.  With echecks, customers need to visit a bank location in person and attest that a transaction was fraudulent.  This requires additional effort on the part of a consumer.  And few people are willing to sign a fraudulent affidavit.  


Echecks are a generic term often used to describe both ACH and electronic check processing.  

ACH transactions are subject to restrictive rules on returns & chargebacks with which most high risk merchants cannot comply.

Electronic checks are processed through bank-to-bank transfer based on Check 21 technology. Providing much greater flexibility for chargebacks and returned transactions.  

High risk merchants discover that echecks are the solution of choice to accept checks online.

Are you a high risk merchant that wants to increase sales & profits with electronic check processing?

Contact today.


Payday Loan Merchant Accounts

Electronic Checks for Lenders

Payment processing for payday loans is getting more challenging to obtain. Yet, good accounts are still available for both US and offshore payday loan companies

The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency examined banks’ roles in the online lending business and issued new guidelines to banks   As a result fewer banks are willing to accept applications for ACH services for online payday companies.

Online payday loan companies are considered high risk merchants.  However, don’t despair. There are echeck accounts available for payday lenders.

Market Demand for Payday Loans

Whether or not you believe the government should interfere with the payday loan industry, don’t expect online payday loans to go away anytime soon.  Online payday loans provide quick money to borrowers who need cash.  Yes, rates are high.  But demand for loans is dramatically increasing.

By 2016, online payday loans will account for 60% of all payday loans, surpassing loans obtained through storefront or retail operations.  This represents an increase of 35% compared to 2011, where the volume was already a staggering $13 billion.

Payday Loans Go Mainstream

Online payday loans make sense for lenders.  It’s less expensive for loans to be initiated over the internet than through a retail operation.  Therefore, lenders can actually reduce costs to borrowers while increasing profit margins.

Once associated only with the subprime market, payday loans are now going mainstream.  The middle class is now turning to the loans to cover living expenses.

For some middle class borrowers, it is less expensive to take out a loan than to risk excessive bank fees if a check bounces.  Moreover, defaults on payday loans are not reported to credit bureaus.  And, if credit scores are low or no credit history is available, payday loans may be the only source for access to quick cash.

High Risk Echeck Processing for Online Payday Loans

Online payday loan companies use ACH  for in 2 ways.  First, to direct deposit funds to the borrower’s account.  Secondly, to debit payments from the borrower’s account to repay the loan.

However, changes in ACH regulations means that lenders are moving to echeck processing rather than using the ACH network for debiting accounts.  Echeck processing gives lenders far greater flexibility for higher returns and revoked transactions.  


Electronic check processing outside of the ACH network is now the norm for lenders.  With an echeck account, you have more flexibility for revoked and returned transactions.  Making it a better solution for lenders working within subprime markets.

High risk merchants have excellent choices for electronic check processor accounts. Protect your business with echeck processing.

Are you a lender interested in an echeck account?

Contact info@NationalACH today.