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

Collection Merchant Accounts

The collection industry has been growing along with debt for unpaid purchases, bills, services, and other debts. There are over 1 billion credit cards open in the U.S. alone, and each American household owes an average of about $135,000 in debt. Factor in the complexity of the ever-growing internet marketplace, and it’s no wonder that consumers slip through the cracks and neglect to pay for provided goods and services.

Despite a notoriously bad reputation, debt collectors work hard to get companies money, and are often honest, legitimate agencies. A reliable and timely merchant account will help lower the risks inherent to the collection industry, but since collections accounts are high-risk, it is difficult for newer and smaller agencies to get approval for merchant accounts that ensure timely and reliable payment processing.

Why is debt collection a high risk business?

Payment processing companies often deny applications for merchant accounts from collection agencies, especially smaller, or less established agencies because of unstable cash flow and poor reputation. A lot of profit stands to be made from pursuing debts. Unfortunately, a variety of factors make it difficult to collect payment successfully and consistently, in turn destabilizing cash flow and harming your agency’s reputation. The following are some of the more common risks faced by collection agencies and how to decrease them.

The risk: Debtors can’t afford their debt

Many consumers simply have other priorities for their paychecks than paying off debt collectors, especially for amounts owed years prior. They know that they need to pay off debts eventually, but that their credit score may have already been damaged, regardless of whether they now close out their account with the creditor.

What to do about it: Make it easier to pay and inconvenient not to pay

If you don’t offer convenient ways for debtors to pay, they won’t try very hard to comply with requests for payment—especially those who owe money on delinquent accounts. One of the most likely ways to deter someone from paying their debt as soon as possible is not offering several clear options for payment. These options should include

  • ACH / echecks
  • Debit card payments
  • Accept payments online on your website
  • Accept payments by phone

Accepting payments through various formats and methods will make it more difficult for debtors to delay paying your agency and thus destabilizing your agency’s cash flow. 

Keep in mind that many debtors cannot afford their payments, and may not have room on their  cards to make payments on their debts. E-checks are a more convenient payment option that can be used by a wider range of consumers to pay off debts. This improves the consumer’s credit score, and profits your agency. The right merchant account will offer several payment processing options, and should also offer verification services to prevent fraudulent or otherwise unreliable payments.

Read more about e-checks for more reliable payment.

The risk: Chargebacks

Cardholders can easily have their bank withdraw money from yours without permission if the cardholder claims he or she did not authorize a payment. This happens for a number of reasons, some legitimate and some not, but the bottom line is that it hurts your business to have money taken back out of your bank account, after which, you are forced to continue attempting to collect the debt.

This also poses a problem for the employees of collection agencies, many of whom are paid based on how fast they can get consumers to pay their amount owed. Bank account information is more reliable than card information, improving financial stability for your employees and lowering the turnover rate at your company.

What to do about it: Use e-checks, make it inconvenient to dispute charges

Consumers are protected by the ability to claim identity theft or otherwise unauthorized payments. It’s more difficult to reclaim money paid with an e-check than with debit or credit card information. Collecting payment through bank account information also reduces the need to update payment information, and prevents erratic cash flow back out of your company’s account due to chargebacks.

Read more about how to handle and prevent chargebacks.

The risk: Debt collection agencies have a poor reputation

Not only are collection agencies known among consumers for incessant phone calls, angry letters and poor customer service, but those in the collection industry are regarded as high-risk accounts, unless the company has a long, well-established history.

What to do about it: Open the right merchant account, verify debts and operate honestly

With a reliable merchant account, you should be able to verify accounts and payments. This prevents back-and-forth discussion with creditors, consumers and credit bureaus to settle accounts and collect money owed. ACH payments or e-checks also decrease time spent having to contact and re-contact consumers to successfully transfer payment. The less time calling or writing debtors, the less likely you are to be perceived as aggressive and more likely you are to be paid.

Some collection agencies purchase debts that may have been acquired previously by other collectors, and attempt to collect the debt without verifying its legitimacy. To encourage a positive reputation for your agency, don’t purchase debt that hasn’t been verified. “Zombie debt,” though cheap to purchase from creditors or other collectors, is easily disputed, and leads to negative perceptions of your agency and limited cooperation of debtors.

Now what?

If you’ve decided that you do want to pursue better ways to ensure financial stability and higher collection rates, find the right merchant account to help lower the risks associated with the collections industry. Take advantage of different payment options to make it easier and more convenient to pay, and inconvenient not to pay. Bank account information is more reliable for your business than credit card information, and your merchant account provider should offer services against fraudulent payments.

How PCI Compliance Relates to ACH Payments

What is PCI Compliance?

The Payment Card Industry Data Security Standard, commonly known as PCI DSS, has long been the leading authority in terms of security for the credit card processing industry. Its reliability makes PCI enormously valuable when it comes to protecting not just card information, but any type of sensitive data, such as ACH payment processing credentials.

The misconception that only large companies that have huge processing capabilities need to be concerned with security will hopefully become less widespread. Today’s context makes it necessary for all merchants, irrespective of size, to protect sensitive information, and PCI DSS provides the necessary framework to do so. 

PCI is required for card payments.  Yet, it also adds protection for ACH payment processing.  

How PCI Helps Prevent ACH Processing Fraud

PCI compliance was introduced in the payment industry to stem the tide of fraud losses, but unfortunately, not all entities respect it as they should. A recent study released by the American Bankers Association (ABA) suggests that, in spite of the best efforts of banks to prevent fraud, their task is rendered difficult by retail data breaches.

These breaches, which have become the norm in recent years, are made possible by insufficient security protection.

The good news is that ACH payment processing, online banking, and wire transactions taken collectively make up just 2% of the losses reported by the ABA. Fraud losses, however, continue to increase, mainly because not all parties involved in the payment ecosystem are equally concerned with security and prevention.

The consistent implementation of PCI standards would make it considerably difficult for fraudsters to make a breakthrough to your ACH payment processing.

Tips to Protect Your ACH Payment Processing Account

Each business that uses ACH payment processing needs to do its share in this collective effort to prevent fraud. Even though ACH payments accounts register less fraud attacks, the risk is far from non-existent.

Since ACH payments are often low risk, ACH transaction processing is largely automated.  Therefore, detection of fraud might not occur in time to stop it. Given the fact that business accounts have just 3 days to reverse an ACH payment processing fraudulent transaction, it would be unwise to disregard this risk.

Some components of the PCI standard considerably reduce the prospect of suffering ACH payment fraud.  These include:

  • Maintaining a firewall
  • Using encryption when transferring sensitive data
  • Making sure that the virus protection is up to date
  • Putting into place a security policy that each employee needs to follow

How Employees Contribute to Fraud

Fraudsters can get access to ACH payment processing  information by targeting employees with tried-and-tested techniques,

For example fraudsters install  malicious software as email attachments.   When the employee clicks on the attachment, the harmful software is installed.  Some newer, more sophisticated, and quite effective techniques involve social engineering and impersonation.

These threats can be addressed by providing training to employees that handle ACH payment processing information on how cybercriminals perpetrate their acts.  

Also, two-factor authentication is an increasingly used method of securing payment information.

Regardless of what security measures a merchant decides to adopt, they need to be implemented and followed as consistently as possible, until they become a part of business as usual.


Following PCI recommendations for safe payment processing is a wise strategy.  Protect your business by following PCI standards for secure processing. 

Interested in finding out more? Contact


High Risk ACH Processing Compared Echecks

High Risk Merchants Prefer E Checks

In the US, there are two methods of debiting a bank account.  First is ACH debits, which process transactions through the Automated Clearing House network.  The second is echecks, which processes payments via bank-to-bank transfers.

Many merchants who were using high risk ACH processing are moving away from ACH payments and are using echecks instead.  The reason for the change is that NACHA is changing the rules regarding the number of returned transactions that are permitted to flow through the ACH network.

Beginning in September 2015, the threshold for unauthorized returns (also known as revokes or chargebacks) is being lowered to 0.5% from the current from 1%.  Returns for administrative or account-data errors must be no greater than 3%,   In addition overall returns for any reason must not exceed 15%. 

If return rates go over the levels, ODFIs risk investigation or enforcement proceedings.  The proceedings includes an 8 step process that examines every part of the banks’ ACH processing. 

Let’s get real.  How many ODFIs do you think are going to be willing to risk an examination?   In reality, most banks will get rid of high risk ACH processing merchants rather than take any chances.

Echecks Different than High Risk ACH Processing

The user experience with both ACH processing and echecks is the same. The customer provides bank routing and account number information and authorizes the transaction.

The difference is on the back end processing. 

With ACH, transactions clear through the ACH network.  Therefore, the transactions are subject to NACHA rules. 

Echecks are cleared through bank-to-bank data exchange.    These transactions are governed by the UCC and long-standing laws regarding checks.

As a result, echeck transactions do not need to adhere to the tight and rigid rules governing ACH payment processing.  There is substantially more leeway for returned and revoked transactions.

How High Risk Merchants Set Up E Check Processing

The application for electronic check processing is very simple.  You submit an application along with supporting documents.   Allow 5-7 business days for the account to be activated.  Then you’re good to go.

You can integrate echeck processing with your websites via an API to accept checks online.  You can accept check by phone, mail and fax orders using a virtual terminal.  And you also have the option of uploading batch transactions through a secure FTP site.

Are you a high risk merchant that wants to increase profits with echecks?

Contact today.

eChecks Increase Travel Merchant Profits

Accept Echecks to Get More Orders 

The more payment options travel merchants offer customers, the more sales will be made.

When you accept checks online, sales increase up to 30%.  You capture sales from customers who do not have cards, are maxed out on cards, or who simply prefer to pay you with an electronic check.

Echecks are the most popular alternative payment for US buyers.  If you don’t offer echecks, you are losing sales to your competitors who do.  

eChecks Benefits Compared to Cards

These days most travel reservations are made online. Yet, card processing is expensive and risky.  And travel merchant accounts are difficult to obtain and maintain.  

Travel businesses are considered high risk merchants for card processors due to the risk of chargebacks.  Travelers can chargeback a transaction for up to 180 days after the purchase is made.  

A chargeback can occur for actual fraud or for what is known as “friendly fraud”.  Friendly fraud is a greater risk for travel merchant credit card processing than actual fraud.

With friendly fraud, a legitimate transaction is disputed by the customer based on spurious reasons. Usually, the main reason behind the dishonest behavior is the intention of obtaining a refund for payments that cannot be refunded on request, such as a hotel reservation for which the customer never showed up. 

How E Checks Reduce Chargeback Risks

Echecks give you proven payment method to substantially decrease your risk for credit card chargebacks.  The more transactions you can process with electonic checks instead of cards, the fewer chargebacks will impact your card processing account.  

The chargeback period for echecks is 40-60 days (depending upon the method of processing the echeck).  Card transactions can be charged back for up to 180 days.  Therefore, your risk for contingent liabilities are significantly shorter with electronic check processing.  

And it is much more difficult for travelers to chargeback an electronic check transaction.  Travelers must contact their bank to dispute the transaction. Documents must be presented to prove the case.  Some banks require travelers to sign an affidavit.  

It takes a great deal of time and effort to dispute an electronic check transaction.  Far more than it takes to dispute a card payment where the traveler simply needs to call their issuing bank.  

Growth in Travel Industry

Whether it is a matter of entertainment, self-discovery, exploration, or relaxation, people love to travel.  In addition to leisure travel, many customers travel for business.  Travel is among the fastest growing industries in the world.

 The US Travel Association points out that the traveling industry is one of the biggest employers and the largest exporter of services.  In 2014 alone, the travel sector produced an economic output of $2.1 trillion, and its volume is expected to rise by 4.3 percent annually until 2020.

Travel  trends of 2015 show increasing use of mobile technology and social media. Other emerging trends will make long-haul traveling more tempting, and will improve customers’ experience through faster boarding and more comfortable plane seats.  


The key for any industry to achieve maximum profits is to meet customer demands.  American travelers expect to be offered different payment methods when booking online.  If you offer only cards, you are leaving money on the table. 

Electronic checks are a familiar and trusted alternative payment method. Millions of American travelers regularly pay for goods & services with echecks.

Accept checks online.  Accept check by phone, mail, and fax orders.   

Echecks are convenient for your customers.  And profitable for you.

Interested in finding out more about increasing your sales with echecks?

Contact today.       

Fraud Lower for ACH than Cards

Decrease Processing Risk with ACH Processing

One of the reasons to choose ACH processing over credit card payments is the lower risk of fraud.

To put matters into perspective, a report presented by the Federal Reserve in July 2014 illustrates the disproportion that exists between credit card fraud and ACH fraud. For year 2012, which would be the most recent information available, there were 13.7 million fraudulent credit card transaction, amounting to a value of $2.3 billion. In the same year, 0.5 million fraudulent ACH payments amounted to a total value of $393.3 million.

In spite of these reassuring numbers, it is expected to see an increase in fraud attempts, as the popularity of ACH payments continues to rise. Consequently, it is essential to understand how ACH payment fraud occurs and how it is different from other types of fraud.

ACH Payments Fraud

ACH fraud is, in fact, quite easy to perform. The only two elements that the fraudster needs are the bank account number and the routing number.

In order to obtain these pieces of information, perpetrators will most likely use an email phishing technique that will enable them to install malicious software on the victim’s computer and obtain the login credentials to the bank account. Once this information is collected, the fraudster will initiate a transfer to their own accounts or provide it to a third party in order to request a payment.

Some fraudsters prefer a low-tech approach by relying on the information available on checks or by simply tricking the account owner in handing over the details. Once they gain access to the account, fraudsters may change the contact information in order to make it difficult for the bank to contact the account holder, impersonate the account holder if a verification does take place, or make payments that are consistent with the normal pattern of the account holder so as to fly under the radar.

Irrespective of the methods used, by the time the account owner realizes what had happened, the damage has already been done. If the fraudster withdraws the amount or transfers it repeatedly through international banking systems, it may be impossible for the originating bank to recover the loss.

When it comes to online payment fraud, prevention is the best way to go. Consumers and businesses have to be as educated as much as possible on how to avoid phishing scams and they must be careful to whom they provide their account information. Checking the bank statement as often as possible is also extremely helpful in identifying ACH fraud on time. In turn, banks have to integrate proper authentication, behavior analysis, and transaction monitoring into their fraud prevention strategy.


Despite fraudsters’ resourcefulness in exploiting loopholes in any payment system, the fraud rate of ACH payments continues to be considerable lower than the credit card fraud rate. This is extremely advantageous especially to high-risk merchants that are frequently most vulnerable to fraud attacks.

Implementing ACH payments through lets high-risk merchants benefit from safe and convenient online payments through the ACH network.

Interested in finding out more about ACH payments?

Contact today.