Which Is Safer? 8 Things You Didn’t Know About ACH and Credit Cards

Are ACH payments safer than credit card payments? — Image Source: Pexels

If you’re looking for a safe payment option, you may be considering an ACH payment or credit card. You may be wondering, “Is an ACH payment safer than a credit card payment?” Here we’ll discuss 8 things you need to know about ACH and credit card payments before making a decision.

1. What Are ACH Payments Used for?

Automated Clearing House (ACH) transactions are an electronic method of transferring funds between bank accounts in the United States. Because of their lower costs, ACH payments are good for recurring payments, high-volume transactions, and business-to-business (B2B) operations. They can process a large volume of transactions at one time like for payroll for instance.

2. ACH Payments Are Less Flexible

ACH payments can only be used for certain purposes such as bill payments or direct deposits. For many B2B payments, ACH payments make sense since most businesses rely on the banking system. However, ACH payments may not be flexible enough for retail settings. Typically, credit cards are more flexible for consumer to business payments.

3. ACH Payments Aren’t Guaranteed

Unlike credit cards, ACH payments aren’t authorized in real time. While a credit card company checks available credit with each purchase, ACH payments may be denied due to closed accounts or insufficient funds much later. This can cause failed transfers or additional delays.

4. Credit Cards Incur Higher Transaction Fees

Transaction fees for most credit cards typically range from 1.5% to 3.5% of the transaction amount, plus additional per-transaction charges. On average, an ACH fee will cost about $0.29, but there are many factors that affect ACH fee costs, including the number and size of transactions.

5. Credit Cards Are More Prone to Fraud

Credit cards are more prone to hackers and fraud than ACH payments. ACH payments use a centralized network to process payments adding more security than individual credit card companies. While you can always dispute a fraudulent charge on your credit card, ACH payments are considered safer for large transactions. ACH payments must pass through clearinghouses that enforce strict regulations. Money is transferred directly between accounts, with account numbers kept confidential.

6. ACH Payments Aren’t Instantaneous

ACH transactions typically take one to three working days to settle. You may be able to get these payments faster, but you’ll likely incur an additional fee. If you need a fast payment, an ACH payment may not be the best option.

7. Can an ACH Payment Be Reversed?

Both ACH and credit card payments can be reversed although the protocol of each is different. With an ACH reversal, you have five business days after the funds are settled. There are also certain conditions which must be met for a reversal. These include duplicate payments, an incorrect payment recipient, an incorrect payment amount, or a payment date earlier or later than intended.

8. Can a Credit Card Payment Be Reversed?

In terms of credit cards, customers can dispute a charge to receive a refund or a chargeback. Chargebacks can only be issued for cases of fraud, service issues, or technical issues. Chargebacks often incur a fee of as much as $35 or more.

Are ACH Payments Safer than Credit Cards?

Both payment options have their benefits. ACH payments are less prone to fraud. For payments between parties with an existing relationship, ACH payments could be a safe option. If convenience and quick authorization is needed, a credit card payment may be the better choice.

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Teri Monroe

Teri Monroe started her career in communications working for local government and nonprofits. Today, she is a freelance finance and lifestyle writer and small business owner. In her spare time, she loves golfing with her husband, taking her dog Milo on long walks, and playing pickleball with friends.