ACH vs eCheck: What’s the Difference?

As digital processes become increasingly transformative, it makes sense that businesses are shifting away from traditional banks and a reliance on paper checks. An Electronic Funds Transfer (EFT) is a modern way for businesses to process payments securely. That said, EFTs are often referred to as either “ACH transfers” or “eChecks”. A common question we’re asked is how ACH payments differ from eChecks. In light of this interest, this post will explore the comparison between ACH vs eCheck.

What are ACH Transfers?

An “ACH transfer” is a form of payment that allows businesses to send and receive payments via their online banking account. The most common ACH transaction type is an ACH Debit (think: bill payment),  which is the most common of the transaction types. Merchants can also initiate ACH Credits (think: direct deposit) once you have authorization to debit customers using their bank routing/ABA and account numbers. Further, ACH transfers are beneficial for setting up recurring payments, which can help businesses maximize retention. You can learn more about ACH in our post, ACH Payment Processing for Businesses: A Comprehensive Overview.

What are Electronic Checks?

But how are electronic checks, or “eChecks,” different from ACH transactions? When you use an “eCheck” to initiate a bank transfer, you’re likely processing a digital version of a paper check that initiates a one-time transfer from one bank account to the other. It’s significantly faster than manually processing a physical check. When processing an eCheck, you will still use the routing and account numbers on a bank statement, along with authorization from a customer. In the case of a paper check, the authorization you obtain will be in a written form. When you submit an eCheck, it will process through the ACH Network.

Using ACH vs eCheck

As a merchant, the information required to process each transaction type is essentially the same. For compliance purposes, you’ll need to obtain authorization from your customers in order to directly debit their bank account. The type of business that you do will help you determine the type of authorization you’ll need to capture. You can find more information, including sample authorization language, here: Understanding SEC Codes.