ACH Vs EFT Payments: Key Definitions And Comparisons
Electronic transactions are taking on new forms and acronyms every day. With so many digital terms, it’s easy to confuse one with another. One common occurrence is substituting the acronyms for common digital financial transactions. Continue reading to learn the key differences between ACH and EFT.
What Is EFT?
EFT is short for electronic funds transfer and is commonly referred to as electronic banking. When this method is employed, money can be electronically moved between accounts at different financial institutions. These transactions don’t simply relate to transferring money between accounts but also entail payment of utilities, purchases, and other types of expenses.
With the invention of EFT, the need for paper-based cash transfers has been eliminated to a large extend. Electronic funds can be transferred via several methods including wire transfers, debit cards, direct deposits, electronic checks, personal computers, and ATMs. With a range of transaction methods, EFT makes banking remotely a whole lot easier.
The processing time for electronic transfers ranges anywhere between one to four days. This time also depends upon the method of the transaction as well as the day on which it takes place given that most transfers are only processed on business days.
So, what’s the difference between ACH and EFT? Amongst the different types of transaction processes that fall under EFT, there’s one that’s called an ACH payment.
What Is ACH?
ACH stands for the Automated Clearing House and operates as a fund transfer network operated by the National Automated Clearing House Association. Between ACH vs. EFT, the Automated Clearing House Network handles payments that fall under the category of electronic funds transfer.
You can conduct this type of transaction in the form of direct payment or direct deposits. A direct deposit transfers the amount from one bank account to another electronically. With direct payment, the originator authorizes a different party to deduct a sum directly from their bank account.
These deposits and payments are also known as automated clearing house credits and debits. Moreover, like scheduled EFT transactions, you can arrange for your ACH transfers to be either recurring or one-time only.
Certain transactions come with an associated convenience fee. It’s the same with EFT payments via credit cards, direct deposits, or other electronic transfer methods.
Which Is More Convenient?
Payment options typically offer a varying degree of convenience, but you must factor the fees before weighing one against the other. If you’re not sure whether your method comes with an associated convenience fee, it wouldn’t hurt to do a little research. Normally, the wide range of payment options and overall affordability make EFT and ACH more than feasible. However, the cost can sometimes offset this convenience.
This especially applies to small and medium-sized businesses. Rates and fee structures associated with money transfers vary by the different payment processing mechanisms. Sometimes the fee involved may be somewhat of a downside to the general convenience of that process.
It’s a common practice amongst businesses to compensate for these fees by passing on the cost of transactions to customers. Still, before doing so, it’s very important to thoroughly acquaint yourself with the rules and regulations characterizing these payments. Furthermore, your customers must be informed about any additional costs and surcharges involved.
Looking To Accept ACH? Here’s How
ACH payment acceptance is a lot easier than you may think. Additionally, invoicing can make the process much faster and less burdensome. With these measures in place, everyday business activities such as generating customer invoices, positioning reminders, and generating tracking reports are a breeze. It also gives your clients the freedom to select their preferred transfer method when they reach the online payment portal.
As you gradually scale your business, you can upgrade customer invoicing with subscription billing by integrating your system with invoicing software. If you haven’t integrated your business with invoicing software and are unsure about the potential, consider testing a free trial version that many programs offer before subscribing.
Why Invoiced Payments Are Important
Businesses don’t only issue invoices to receive payments but also to pay bills that must be tracked. Securing a consistent and trusted invoice system can help with organizing and managing your accounts payables as well.
Invoices made with the help of software often come with the added benefit of streamlined onboarding and embedded payment processing. This software is typically powered to support a wide variety of money transfer platforms. Convenient payments along with systematic scheduling empower businesses to keep a close on accounts while fostering trusted relationships with clients and vendors alike.
The Bottom Line
Since their introduction, electronic fund transfers have revolutionized industries, making it easier for businesses to handle their banking outside brick and mortar branches with limited resources. In the time that’s passed, other electronic platforms have arisen to facilitate even faster fund transfers that are accompanied by competitive fees.
Most importantly, when combined with durable invoicing software, EFT activity and company recordkeeping can be combined for superior reporting and accountability.