Hello,

I was wondering how do I go about setting up EFT or ACH to accept payments? Would it be cheaper than accepting credit cards? I assume it would be less but don't know how or where to find places that will let small businesses do this.

I've searched around but the only thing I could find is Electronic check clearing which is not quite the same. I'm looking for something kind of like how my water bill is paid. I give them my bank info and they withdraw they automatically deduct it.


Thanks in advance,

Leena

I asked my back about electronic checks. They reffered me to the company that does electronic check conversion for the merchants. I found they also did EFT and ACH services. Fees are about $0.75 for the first transaction, $0.25 for each recurring transaction. Gateway fee is $10/mo. They only do local stuff, but from what I'm told the fees are pretty standard since ACH/EFT costs pennies per transaction. Everything else is pure profit for the provider.

I think the "E-Check" system from Authorize.net and similar companies that charge a discount rate on a service that should be flat rate is a rip off.

what was the company name?

Motytrah, it sounds like you have a pretty good deal with your bank. :) You are also correct in that ACH/EFT transactions are less expensive than credit card transactions.

One quick note, however, in defense of all of the Internet e-check processors out there like Authorize.Net and everyone else - it is not a matter of "pure profit" on the part of an EFT processor.

While the costs per transaction are small, there is also a very real and tangible loss risk that exists. I'll give you an example: say that an EFT processor approves a merchant and they process $5,000 worth of e-checks by frauduently debiting checking accounts.

The EFT processor pays the $5,000 and then within a few weeks, $5,000 worth of e-checks are returned back but the merchant no longer has any funds left and they have skipped town. End result? A $5,000 LOSS to the EFT processor.

This can happen even with legitimate merchants. The more volume that goes through, the more the risk increases and this is also true with the average ticket size.

The reason why your bank is giving you a very low EFT rate is that they know you as a customer and you probably have a good relationship with them whereby they have an established level of trust.

However, for an Internet ACH/EFT provider - fraud and loss becomes a cost of doing business and that has to be reflected by setting an appropriate level of pricing that covers these losses and still operates on a net profit.

It's actually not my bank. It's an outside provider my bank directed me too. As far as I could tell they seemed to have underwritting as a credit card company.

I just don't see how EFT is any different than Credit Cards in terms of fraud. If anything it should be slightly better as the transactions take longer to complete giving more time for fraud to be found before money is transfered to the merchants account.

I understand fraud is accounted for in the discount rate all us merchants pay. And the better the industry is at catching fraud, the lower discount rates will stay. Even if EFT had the same fraud as credit card it still doesn't change the fact that the transaction cost pennies. If your argument is correct then processors should be charging more like 1% + $0.50 for E-Checks.

That's just not happening out there with processors that came from the Credit Card World. Authorize.net is charging at least 2-3% + transaction fee, and acts like they are doing you a favor by only charging you $25/month for the service. Processors that came from check handling, payroll and B2B/EDI world offer a much better deal for merchants.