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ACH and eChecks both are two similar terms of electronic fund transfer, which are often used interchangeably. ACH means Auto Clearing House, this is used to transfer funds from one bank account to another electronically. An eCheck is an acronym of the term “Electronic Check”. These checks are now being used every day for the replacement of traditional paper checks.
What is ACH
ACH is a fund transfer method used by the US for making transactions between the individual and organization. These transfers are not completed from one bank to another automatically, but they will get monitored by the National Automated Clearing House Association (NACHA).
There are always two parties in every ACH transaction, originator and recipient. The originator bank sends this translation to NACHA, then checks if all the payments are in order or not. When NACHA approves the request for a transaction, the recipient receives the request, then funds get transferred to the originator bank account.
You can also consider it as a network which connects all banking and financial institutes within the USA. Paying a bill also becomes easier and convenient with ACH. Whenever you use a website for making bill payments it asks for an account and routing number, this is an example of ACH. It can also be used to post a credit to a customer account, by the help of an ACH merchant account, your business can withdraw funds from your customer's bank account directly, only when authorization is done by the customer.
ACH transfers are mainly divided into two parts-
● ACH Direct Deposits
● ACH Direct Payments
What is eChecks
In simple words, an eCheck is a simple form of online payment. In this, the fund gets withdrawn from the payer account electronically, then transferred on the ACH network, later on, deposited in the payee’s account.
An eCheck is the upgraded and electronic version of traditional checks. These checks are replaced because of the following reasons:
● Lower production Costs- these checks cost zero printing expenses and users don't need any pen to fill it.
● Improved security feature- they are more protective by protocols, rather than traditional checks.
● High convenience- with eChecks you can pay directly to your employees and other business entities, that’s why it is liked by employees and business firms.
Know more about ACH vs eCheck in Brief:
Difference between ACH and eChecks:
1. Transfer Speed
ACH transactions take 2-3 banking days in the completion of transfer. Because the ACH platform took some time to verify the payment data. And these payments are sent out by banks only three times per day in batches.
eChecks transactions took 2-5 business days to transfer funds in the recipient account. Its process of clearing eChecks depends on the completion of procedures between providers and electronic transactions.
2. Security
In the US, both are controlled by NACHA. That's why both are highly secure electronic transactions.
3. Fees and Cost
In ACH transactions there is no fee for paying bills and transferring money to other individuals from a bank account. But there is a fee for business entities who pay salaries via ACH and that charge is between 0.5% to 1.5
In eChecks, you have to pay a charge between 0.2$ to 1.2$ per transaction, and the amount depends on the transaction, the more the transaction amount the more you get charged.