ACH Transaction Fees and the Hidden Costs of Check Processing

ACH Transaction Fees and the Hidden Costs of Check Processing
By alphacardprocess January 17, 2022

ACH transaction fees, or Automated Clearing House fees, are the charges assessed to merchants for the processing of electronic payments. The amount of these fees can vary based on a number of factors, including the size and type of business, the volume of transactions processed each month, and whether the payment is domestic or international.

Despite their ubiquity, many merchants are unaware of the impact that ACH transaction fees can have on their business. That’s because these costs are often hidden or bundled into other services, like merchant accounts and payment gateways.

How ACH Transaction Fees Affect SMBs?

ACH transaction fees increase with each step in an electronic payment process. They begin when a customer authorizes the transaction, continue when banks transfer the payment to and from the merchant’s account, and end with funds in an electronic holding pool before they are deposited into a business’ bank account.

For businesses that process few transactions each month, ACH fees can be minimal. For companies that regularly move six or seven figures through ACH payments, however, these fees can start to add up.

ACH Fees by Payment Type

One of the most challenging aspects of ACH transaction fees is that they vary widely based on payment type. While businesses can quickly see an ACH fee for a debit card payment, there are several different fees merchants may need to consider when processing other forms of ACH payments.

ACH processing fees can be broken down into two major categories, depending on the payment type: one-time transactions and recurring transactions. Below are some of the most common ACH transaction fee types that merchants will encounter when accepting electronic payments.

Other Transaction Fees for Businesses

In addition to standard ACH fees, businesses can incur other charges for particular types of ACH payment processing. These fees are often assessed by the bank or third-party service provider that manages a company’s business account.

ACH Check Processing Fees

One of the most expensive ACH fees for businesses is for check processing via Automated Clearing House (ACH). Unlike traditional check processing, which involves a single check being deposited into a business’ account, ACH check processing is the electronic conversion of a paper check.

ACH Check Processing Example:

Customer writes a $200 paper check to merchant Joe’s Electronics. Joe’s Electronics enrolls in an ACH Check Conversion Service through their bank. The bank converts this $200 check into an ACH debit payment and sends the payment information to the merchant’s payment gateway. Joe’s Electronics pays a $5 fee for this service.

In this example, the business would pay:

  • ACH Transaction Fee: $5
  • Gateway Fee: $0.50
  • Bank Service Fee: $0.50
  • Check Conversion Fee: $3.00

For this customer, the total ACH check fee would be $9.00. If Joe’s Electronics had five of these payments every month, their annual ACH check processing fees could reach almost $460!

ACH Debit and Credit Transaction Fees

ACH debit and credit transactions are the most common type of ACH payment. These transactions occur when a customer provides their bank account number and routing number to the merchant in order to make a purchase.

In order for a business to accept an ACH debit or credit, they need to have an agreement with a third-party provider, like NACHA. This company will direct the payment from the customer’s bank account to the merchant’s account.

ACH Debit and Credit Transaction Fee Example:

Customers buy a new laptop from Joe’s Electronics using their debit card. Joe’s Electronics has an agreement with their bank and NACHA to process ACH debit transactions. The bank receives the payment information from NACHA and sets up the merchant account with a $0.25 ACH debit transaction fee.