What is in the ACH number?

• Credit card transactions cost the seller a transaction fee and can cost the buyer additional interest.Jupiterimages/Photos.com/Getty Images
  
  The ACH number has three components.
  
  First is the routing number for the buyer's bank. The routing number is an identification number assigned to each bank.
  
  The second part of the ACH number is the assigned number on the account from which the funds are to be withdrawn. Every bank account has an account number unique to that bank.
  
  The third part of the ACH number is the amount of the transaction.
  
  

Advantages over Credit Card

• Any merchant who accepts credit cards must pay a fee for each credit card transaction, usually a percentage of the total transaction. ACH fees are usually flat-rate fees, so for a larger transaction the merchant keeps a higher percentage of the total.
  
  ACH transactions are debited directly from the buyer's account so there no interest is charged. When a purchase is made on a credit card, interest rates can range in the low- to mid-teens.
  
  

Disadvantages to Credit Card

• The disadvantages to a credit card for a merchant come from the fact that the ACH transaction is not processed in real time. In other words, the merchant does not have a way to know if the buyer really has the money in his account at the time of purchase. There is an increased risk of fraud for merchants because of this delay.
  
  For the buyer, because the transaction is directly debited from the account, if there is not enough money in the account, the bank will not honor the transaction and will probably charge overdraft fees to the account.
  
  

Advantages Over Checks

• The buyer can enter ACH information on a secure Web page, saving the cost of postage, the time to write a check, and the hassle of mailing the payment.
  
  In addition to accepting ACH payments online, merchants can scan checks into a computer to turn them into ACH payments. This saves the time and labor costs in filling out deposit slips and sending someone to the bank. For a merchant accepting hundreds or thousands of checks each day, this can add up to significant savings.
  
  

Disadvantages to Checks

• From a practical perspective, an ACH transaction is a payment via check, except there is no actual check. This results in a few disadvantages: A buyer may forget to record an ACH transaction because he did not actually write a check. For the merchant, there may be increased collection issues.