If you are a business owner, selecting the best and cost-effective method of accepting customer payments can be confusing, primarily because the range of payment options continues to grow.
Every smart and intelligent merchant minds the funds coming in and going out. We have to agree that electronic payments in the current business scenario hold a very crucial position. But does this mean merchants shall depend on credit card payments only? Also very less number of businesses worldwide has taken up ACH payments as their primary mode of money transactions.
A lot of businesses use credit cards for upfront purchases if they do not have the immediate funds needed, which can be costly based on payment schedules or interest rates. Accepting credit card payments as a business is an easy , hassle free and quick way to receive electronic payments, particularly for businesses operating solely online.
Businesses like cryptocurrency trading, gambling, nutraceuticals and many more are restricted to buy credit card processing services. Also, if you are fortunate to get credit card processing services for your business you may not be lucky enough to sail smoothly. You will have to be extra attentive towards chargebacks because that might cost you processing ability. You, of course, do not want to see your business getting paralyzed.
What exactly makes a business “high-risk”?
In broad terms, a company is labelled as high-risk if it faces a large risk of financial failure or fraud.
Risk level for businesses is based on several factors, including the following:
- Chargeback ratio
- Credit history
- Transaction size and sales volume
- Industry regulation
- Susceptibility to phishing, fraud, and identity theft
ACH Payment Overview
Using ACH to process funds or payments is secure and simple. In fact, it is considered to be one of the safest methods of transferring money in the United States.ACH transfers happens every time you utilize direct deposit,process a scheduled bill pay, make an automated bank payment or handle any payment being pulled from a real bank account.
Businesses can initiate automatic payments using ACH Debit transactionsor one-time authorized payments( there will be one time code issued usually) using ACH Credit transactions. ACH transactions draw from available funds in the account rather than from a credit limit, giving businesses better control over their immediate finances.
Direct response marketing is only effective if the process is simple and quick. You can offerlimited-period sales and heavy discountson popular products, but your payments system could be holding you back. Card payments carry heavy fees and potential risk, while conventional bank transfers are slow and inefficient. Joining the ACH network through a professional merchant account provider is a great way to eliminate payment hurdles for you and your customers to get into a hassle free process.
Here is the process:
- Your customer begins transferring funds by swiping their debit card
- All ACH entries are transmitted electronically to the originating bank
- Originating bank transfers funds to an ACH operator (either the Federal Reserve or the Clearing House)
- Operator sorts all transactions, and makes them available for receiving institutions (your merchant service provider / bank).
- Your bank (“the receiving bank”) receives funds from the operator.
Credit Card Overview
Credit cards allow you to make purchases using money borrowed from your bank or another financial source.
Accepting credit card payment as a business can guarantee payment since other types of payments that draw from bank accounts can return withrouting errors or insufficient funds.
Credit cards payments can be found everywhere today, but they’ve become particularly useful for those operating in the world of ecommerce.
If you accept credit cards, then the process is:
- The cardholder uses their credit card at the point of sale, and your system begins processing it.
- A third party service (your “merchant service provider”) securely sends the information to the acquiring bank.
- The acquiring bank approves (or rejects) the request, and sends the information to the corresponding credit card’s issuing bank.
- Once the issuing bank receives a request for funds, they make the transfer to the merchant bank account (if approved).
- The credit card company registers this payment to the cardholder’s account, and authorizes the transaction.
ACH vs. Credit Cards at a Glance
The biggest difference between the two types of payment methods mainly the cost.
For merchants looking for a better or more simplified vendor payment method, accepting credit cards may be an expensive option but it will guarantee payment in a way other direct payment methods may not have this option. ACH payments transfers money from one bank account to another, relying on available funds to make payments or purchases.