ACH vs E-checks

Understanding the difference between ACH, E-checks

Updated over a week ago

When moving funds from one bank to another, people may use "ACH" and "e-check" interchangeably. However, there is a difference between the two. Although related, they aren't the same.

The Difference between ACH and E-checks

All kittens are cats, but all cats aren't kittens. Strange way to start off an article, but that's the same relationship between an e-check and ACH.

An e-check is a type of ACH payment. All e-checks are ACH payments, but there are many types of ACH payments.

What is an "ACH"?

ACH stands for Automated Clearing House, an electronic payment network created by the Federal Reserve Bank to manage interbank transfers. This centralized system allows for individuals and businesses to transfer funds from one bank to another.

Note that "ACH" refers to the network itself, and an "ACH payment" is the transfer of funds using that network.

What is an "E-check"?

An E-check is an electronic version of a physical paper check (the 'e-' is short for 'electronic'). An E-check allows a payment to be debited from a payer's bank account and deposited into a receiver's bank account electronically.

What is an "EFT"?

EFT stands for “electronic funds transfer" and refers to any request to debit or credit a bank account via any telecommunications platform. This includes the internet, ATM machine, and even a phone call.

Again, an e-check is a type of EFT, but not all EFTs are e-checks.

With these definitions in place, hopefully you can see that an e-check is a type of EFT that is processed through the ACH network.

Advantages of e-checks and ACH payments

There are a number of advantages of ACH payments over other online payment methods.

  • The ACH Network generally charges lower fees than credit card networks.

  • Recurring payments using ACH is more stable since credit cards have an expiry date and bank accounts don't.

  • In B2B, payments often exceed credit card limits. Charge limits aren't an obstacle with ACH.

  • ACH transactions are processed in large batches, and thus cheaper than wire transfers which are processed one at a time.

If you need to decide whether to accept e-checks or ACH payments, take both. Any payment gateway that allows you to accept e-checks provides the key ACH benefits of lower processing fees.

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