ACH stands for Automated Clearing House, a network managed by NACHA. The network enables the electronic transfer of funds from one bank to another by directly debiting a checking or savings account. It is commonly used for payroll, bills, tax payments and consumer or business-to-business (B2B) transactions.
Many struggle to understand how ACH works and how to handle ACH rejects. Let’s dive right in.
To process consumer or B2B transactions, you simply enter the customer's routing and account numbers and run the transaction. From there, the customer's account is debited and your business receives its funds the next day.
Although you need to key in the account information, once it’s entered, it’s saved if you have a Virtual Terminal that stores cardholder information. So the next time your customer wants to make a purchase, all you have to do is simply pull up her information and charge the account with one click. If your Virtual Terminal stores cardholder data, it should use tokenization to protect sensitive information.
Similar to a bounced check, these transactions can reject. There are a few reasons why.
The network provides status codes when an ACH transaction is rejected. An ACH reject can occur for a number of reasons. For example, the bank account may be frozen or lack sufficient funds to cover the transaction.
There are a few ways to handle ACH rejects and, depending on the reason, some transactions may be corrected and resubmitted immediately. If payments are unsuccessful, you are usually notified within two to four business days of the transaction (much quicker than the five to 10 days it takes with paper checks).
Some ACH reject codes are NOCs, which shouldn’t be taken lightly. A NOC means there was a change regarding the bank account you are trying to debit. Most Merchant Account Providers charge an ACH account number reject fee for every NOC you encounter. If you fail to update the information, most providers will charge an ACH reject fee every time the transaction is attempted.
ACH is ultimately a money saver. ACH payments have lower transaction fees versus credit card transactions. So when it comes to accepting large payments, you can use ACH for efficient and lower-cost processing.
Sick of paper checks? Do you think ACH could benefit your business and streamline your workflow? Tell us what you’re thinking below!