ACH Processing vs. Credit Card Processing: When to Use Each

ACH (Automated Clearing House) payments are bank-to-bank transfers that cost significantly less than credit card transactions. For businesses that process large transactions or recurring payments, ACH can offer substantial savings. But understanding when to use ACH versus credit cards is key to balancing cost and customer convenience.

Cost Comparison

ACH processing typically costs a flat fee of $0.25 to $1.00 per transaction, or a small percentage (0.5% to 1.0%) with a cap. Credit card processing costs 2.5% to 3.5% of the transaction amount. For a $5,000 B2B invoice, ACH might cost $1.00 while credit card processing would cost $125 to $175.

When to Use ACH

• B2B invoices and large payments (over $500)
• Recurring payments (rent, subscriptions, memberships)
• Payroll and vendor payments
• Transactions where the customer relationship is established

When to Use Credit Cards

• Retail and point-of-sale transactions
• Ecommerce purchases from new customers
• Transactions that need instant authorization
• Situations where customers expect card acceptance

Settlement Timing

ACH payments typically settle in 1-3 business days (same-day ACH is available for a premium). Credit card transactions settle in 1-2 business days. While the timing is similar, ACH returns (similar to chargebacks) can occur up to 60 days after the transaction.

Offering Both Options

The smartest approach for most businesses is to offer both ACH and credit card payments, steering customers toward ACH for larger recurring transactions while maintaining card acceptance for smaller or one-time purchases.

Mogil Partners can help you implement ACH processing alongside your credit card program to maximize savings. Contact us for details.