An eCheck or electronic check is a method of payment in which a customer’s funds are transferred from the customer’s bank account, over the ACH (Automated Clearing House) network, and deposited into the businesses bank account. Unlike credit card payments, these work more like traditional paper checks, where funds are transferred directly from the customer’s account, to the merchant’s account.
eChecks Are Becoming More Popular
As a business owner, you’ve probably been asked to accept either a paper check, or an ACH (eCheck) from a customer in the past, particularly from customers without a credit card. Given the delays in receiving such funds, the potential for having a check “bounce”, and a host of other perceived problems with ACH payments, businesses have historically preferred to accept credit and debit cards even though they have extra costs as compared to ACH.
Recently, however, the popularity of accepting ACH as an alternative payment option has been on the rise over the last year, in large part due to technological and regulatory changes that have enabled accepting ACH payments to become a more reliable and swift payment acceptance method.
How eCheck Processing Works
Accepting eChecks is similar to accepting paper checks, although faster, more efficient, and typically more secure because of the electronic nature of the transaction. During an eCheck transaction, the following steps occur:
- The Payment is Authorized
Just as with a credit card purchase, the first step in the transaction is the customer approving the purchase. Typically, this is achieved by the customer completing an online authorization form, or confirming via voice over a recorded phone call.
- The Payment is Submitted
Once the merchant has received authorization, the payment details are submitted to the eCheck processor, again, typically there is an online portal similar to a credit card payment gateway that the merchant enters the customer’s payment information into.
- Funds Withdrawn from Customer’s Account
After the payment information has been submitted, the eCheck processor, through the ACH network, oversees the withdrawal of funds from the customer’s bank account.
- Funds Deposited into Merchant’s Account
The eCheck processor then clears the funds and deposits them into the merchant’s bank account.
What are Same Day eChecks / ACH?
Up until the last 6 months, when a business accepts an eCheck, the customer’s funds have been deposited into a merchant’s account on the next business day, but a new NACHA rule change allows ACH processors to offer same day eCheck processing for customers who want their eCheck funds deposited same day. The new rule also creates a “Same Day Fee” which applies to all same day ACH transactions and compensates ACH processors for the service.
What are the Daily Cutoffs for Same Day ACH?
ACH Operators now offer two settlement time windows for Same Day ACH.
- ACH Transactions Submitted before 10:30 AM ET, are settled same day at 1:00 PM ET
- ACH Transactions Submitted before 2:45 PM ET, are settled same day at 5:00 PM ET
What eCheck Transactions Are Eligible for Same Day ACH?
Almost all ACH or eCheck payments are eligible for same day ACH under the new NACHA rules. That includes both credits and debits. The only significant exceptions are international transactions (IATs) and high value transactions (those above $25,000), which are not eligible for same day ACH. Combined, these exceptions make up less than 1% of all ACH network transactions.
When is Same Day ACH Available?
In some cases, same day ACH is available now. The first rollout began in September 2016. But actual implementation by many ACH providers is rolling out throughout 2017.
How To Apply for Same Day eChecks
The ACH network is separate from credit card processing, and thus many merchant account providers offer the ability to accept eChecks as an optional add-on to a traditional credit card processing account.
Same day ACH is currently available as an option through a number of ACH providers. Simply contact your existing ACH provider and ask whether same day ACH is available, and decide whether the extra associated costs make sense for your business. If you need an ACH provider, apply with Soar Payments or contact our Sales Team to discuss your business’ eCheck needs.