eCheck vs. ACH What Is the Difference?

Many terms exist to describe types of automatic payments and it can be hard to understand what they all mean. At a high level, the broadest category is electronic funds transfer (EFT). Automated Clearing House (ACH) payments and eChecks are two examples that fit under EFTs. eChecks and ACH are two terms often used interchangeably, however, they have distinct differences. ACH transactions take many forms, from interest to payroll, while eChecks refer only to electronic transactions completed between checking accounts.


What Are eChecks?

An eCheck is a type of ACH payment that involves transferring money between two checking accounts. This payment method goes by several other names, including electronic check, direct debit and internet check. Many businesses incorporate eChecks into their systems to accept large amounts of money. Companies that operate solely online also benefit from eChecks because they offer customers an additional payment option for transferring funds.

eChecks function much like paper checks but have an advantage because they do not become outdated. They also process faster because they skip the manual deposit process of sending a check and waiting to bring it to a bank. Typically, eChecks process in 24 to 48 hours. Customers also get more security through eChecks than they would with traditional payment methods, making them an appealing option for those sending and receiving funds.

It’s important to note that a business must work with a processing company to use electronic check ACH transfers. eChecks require particular software for safe and effective use.


How Do eChecks Work?

Unlike a regular paper check, a business making an eCheck payment doesn’t write or print information onto a piece of paper. Instead, the payer enters all information electronically. Typically, the payee will send an online form where customers enter their checking account information and the amount paid. Payees can also accept eChecks over the phone with recorded phone calls. This process can save time and reduce paper use, creating positive environmental effects.

Another important note is that merchants must pay a small fee to process eChecks. The price is minimal and often worth the cost due to the added convenience and savings gained by not having to print and mail paper checks.


How eCheck Processing Works

Businesses desiring to implement eCheck processing may want a more in-depth look at how the process works. Here’s a step-by-step explanation:

  1. Reach out for authorization: All ACH payments, including eChecks, require approval from both parties by sending a signed order form, speaking on the phone or filling out an electronic form.
  2. Enter payment information online: To begin processing information, you must enter customer information, including account number, name, address and federal tax identification number.
  3. Confirm and submit: After filling out all necessary fields, your business should ensure all information is correct, save it and make the transaction.
  4. Process payment: Once you submit a payment, the payer’s account will automatically withdraw the amount within three to five days.
  5. Receive confirmation: The customer will get a receipt that shows the check amount and other details.


What Is ACH Processing?

eChecks are a type of ACH payment but not the only kind that exists. Broadly, ACH refers to the Automated Clearing House, a federal EFT system run by the National Automated Clearing House Association (Nacha). The network moves money directly between banks for ease and security in transferring money. Consumers, businesses and governments use this funds transfer method.

ACH processing has two main categories—credits and debits—so you can send money to customers or request that customers pay you. Here are a few primary uses for ACH transactions:

  • Refunds (including taxes)
  • Interest payments
  • Government benefits
  • Payroll
  • Employee expense reimbursement


How Does ACH Processing Work?

The ACH network connects thousands of banks and other financial institutions across the United States. When a business or individual pays or requests payment, the request gets batched with other transactions. The ACH processes transactions in four batches daily, excluding weekends and federal holidays.

During processing, the Federal Reserve or a clearinghouse receives the batch of transactions. The institution sorts them to determine which bank the payment must come from and which bank receives it. The recipient’s bank account gets the transaction and reconciles both accounts, which completes the transfer process.


eChecks vs ACH: Breaking Down the Differences  

eChecks are a specialized form of ACH transaction, so these two electronic payment types have many similarities. Both are processed electronically, use the same network for processing and require authorization before making or receiving a transfer. They also have the same transaction limit.

Though eChecks and ACH have many similarities, comparing electronic checks vs. ACH brings out a few differences, including:

  • Payment time: Both electronic transfer types take about one to two business days to process. However, those receiving eChecks must often wait about three to five days to receive the money.
  • Technology used: eChecks were not available when the ACH was first created. This payment type was added to the system after new technology was developed and requires using an eCheck service.
  • Payment uses: eChecks are more specialized than ACH transactions, usually for one-time expenses. ACH covers recurring costs that occur on a schedule
  • Cost per transaction: ACH and eCheck transactions typically charge fees based on a percentage of the total transaction, but the fees charged for eChecks are often much lower. Both payment types have lower costs to process than credit card transactions.


Choosing a Payment Method

ACH payments and eChecks offer affordability, speed and security, making them appealing money movement options for merchants and customers. When deciding which would benefit your business more, you can refer to the differences between these payment types to decide which is best for your business’ needs.

For example, a recurring expense like payroll is better handled through ACH than an eCheck. Payments from customers to your business might work better with an eCheck. Companies that see benefits in both types of transactions can often get them together since they use the same system.


How Can CSG Forte Help You Process eChecks and ACH Payments 

eChecks are a secure, fast and convenient way to receive payment from customers, but you need a processor that accepts this payment type. CSG Forte offers a payments platform that accepts eChecks, ACH transactions and credit and debit cards on a single platform. Our system integrates with existing ones and can be customized to meet changing business needs. Learn more about how our complete payments solution can benefit you. You can also explore ways to get started with our solutions.