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Security of ACH Payments

Louise Sanderson
by Louise Sanderson on 5/18/17 11:00 AM

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“Will that be credit or debit?” You’ve likely heard this question many times before, but have you heard about ACH? ACH stands for Automated Clearing House, which is the process through which an electronic transaction occurs. Given its nature of being an online payment method, people sometimes question the security of ACH transactions, but each year ACH moves more than $41 trillion and 24 billion electronic transactions including direct deposit and Social Security.

The ACH has been around since 1974, and all transactions are regulated by the Federal Reserve Bank and the Electronic Fund Transfer Act. Beyond that, every transaction must follow the rules established by the NACHA, the Electronic Payment Association. So at the onset, ACH is regulated and a safe way to pay, but how does ACH stack up against other payment methods in the realms of processing and security?

ACH vs. Debit Card Transactions

There are two types of ACH transactions: credit and debit. ACH credit pertains to receiving direct deposited checks, sending in online bill payments, and sending funds to another person’s account normally through a bank. ACH debit, on the other hand, deals with making online purchases, which WalletHub likens to sending an electronic check or a direct debit, and it’s the type of ACH transaction that potentially causes concern.

At a quick glance, ACH seems like a debit card transaction. They both are tied to your checking account, and they both use funds in that account to make a payment. The difference is that to set up ACH, you give the ACH, a third party between the company you’re buying from and the bank, your banking information, whereas a debit card is linked to your bank.

The idea of giving a third-party access to your bank account information is one of the leading causes of skepticism when it comes to ACH payment. But it’s key to keep in mind that debit card transactions can also pose a threat, as they are at risk of having the number skimmed by devices criminals install on both ATMs and gas pumps.

Contrary to the skepticism, you are more protected with ACH payments than with debit cards if something were to happen. According to the Federal Trade Commission, customers must report fraudulent debit card transactions to their bank within two business days of learning of the loss or theft to have their liability limited to $50. If they report it more than two business days and less than 60 days after they receive their bank statement with the fraudulent charges, their liability is $500. Meanwhile, The Electronic Fund Transfer Act protects consumers from fraudulent ACH transactions. Customers have 60 days after the transmittal of the statement with the unauthorized charge to report it to their bank, and they have no liability. 

Another added security measure with ACH is that authorization is required before any money can be debited from a bank account. That means that the customer has to authorize the company to debit the account and the company conforms to ACH Operating Rules, which is not the case with debit card transactions.

ACH vs. Checks

Back in the day, everyone used to pay bills and make big purchases with checks. But now, that number is shrinking as more people are choosing online bill pay with a credit or debit card, or are opting to use ACH debit in the popular form of PayPal.

While ACH debit transactions are practically synonymous with electronic checks, that doesn’t mean they should be treated with the same hesitation. As previously mentioned, many people are worried about giving their bank account and routing number to the ACH, but think about what’s printed on every check you’ve ever written. Your bank account and routing number! In addition to that, Karl Eisenhower of WalletHub said checks “also probably have your full name, your home address and your phone number,” which is sensitive information that could go through many hands.

Plus, with ACH, you’re only giving your information once, instead of displaying it on every check you write. So while some worry about the security of an ACH processing system, writing a check can pose a bigger security threat, which leads some urging you to stop using paper checks.

In addition to concerns about security, ACH offers faster processing times than with checks, so your transaction will be fulfilled sooner. PaySimple even said ACH billing takes about 3-5 days processing, but most banks favor ACH transactions over paper checks when making funds available.

ACH in Action with ShopWithScrip

Understanding ACH is important to ShopWithScrip as we offer PrestoPay™, our secure ACH processing system that lets you pay for orders conveniently as a part of your scrip fundraiser. Setting up PrestoPay for your fundraiser means supplying your bank account and routing number and creating a PIN that is unique to you which keeps your account safe when you’re placing your order.

We let families pay by check if they want, but as you’ve read, paying through ACH might be even safer than that. Plus, families using PrestoPay can move the fundraising needle more, which is what really matters! Paying with PrestoPay means there’s no waiting around for a check to be deposited before a family gets their virtual gift card products, like eGift Cards or reloading their previously purchased cards. They place their order, pay with PrestoPay, and receive the funds right then and there because they paid automatically.

Companies can do their fair share to keep accounts safe as well. For example, we transmit all of a family’s PrestoPay information through secure data links. Everything regarding their account is encrypted, which means that all of the information we have is stored on our servers in an unreadable format, so it is entirely protected.

Families fundraising with gift cards have been using our ACH payment system, PrestoPay, since 2008 because it’s fast, convenient, and secure, making families feel good about paying for their orders online.

So ACH isn’t a payment method you should be afraid of or rule out. Much like everything else, being cautious about any online payment method won’t hurt— just know that ACH offers an easy and secure way to pay.

Next Steps:

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Louise Sanderson
Written by Louise Sanderson
Attending public schools all her life and being a three-sport athlete, Louise is no novice to fundraising. When she's not writing copy for Great Lakes Scrip Center, Louise can be found playing recreational sports too competitively, or spending quality time with her dog.

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