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Why Some Payments Take Longer Than Others

Updated on January 17th, 2022
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When you are expecting a payment, a delay of a few minutes can feel like hours. Waiting for ACH, credit card, and other payments to process can take days, but when you are strapped for cash, the difference of a few days can feel like an eternity. But don’t blame the customer! There are many delays in the payment cycle that could be holding up your money. Read on to learn more.

ACH Payments

The Automated Clearing House (ACH) is a system maintained by the Federal Reserve Bank. It’s used to send payments between bank accounts in the United States. These types of payments are typically referred to as ACH or electronic funds transfer (EFT) payments.

ACH payments require several steps to complete, which means transactions may be settled in just one day. However, sometimes they take up to two days or more to complete. ACH payments used to take longer to complete, but are getting faster and faster every year.

For a debit transaction, expect the transaction to complete in one day according to current ACH rules, which are set by the Federal Reserve Bank and NACHA, the Electronics Payment Association. Credit transactions can complete next day, but the current rules allow for two business days.

Card Payments

While credit cards and debit cards look alike, the payment methods are handled very differently. Debit cards pull from bank accounts and work more like an ACH payment. Credit cards pull from a line of credit and have their own unique settlement cycle.

Like all payment types, cards come with some risk. Your payment system inquires about funds availability in the transaction process, but just because funds are there at the moment you swipe doesn’t mean the customer is not about to go over limit or overdraft their account.

To ensure you only get good funds that won’t need to be clawed back, card processors typically hold funds in various stages of the approval process. They may sit for a few days in your merchant account before going to the bank. Count on at least 2-3 business days for card payments to complete and show up in the bank, if not a day or two more in rare cases.

Digital Wallet Payments

The ACH system and worldwide electronic fund transfer systems are getting faster and faster. The only bank based method for reliable same-day transfers are wire payments, which are high risk and expensive for both parties. However, digital wallets are changing that.

With digital wallets, payments can complete both instantly and securely. Whether you are using your Due.com digital wallet or one elsewhere, funds held in a digital wallet are secure and don’t require an ACH or card to move money. When the payer enters the information and clicks submit, the funds are instantly whisked to the seller’s account. Then you can save the funds in your digital wallet or transfer to your bank account via ACH. While the money is not in the bank when it shows up in your digital wallet, it is pretty darn close. The funds there are in your possession, which as the saying goes is 9/10ths of the law.

The Payment Power is Yours

As a business owner, you decide how you take payments. By accepting a wide range of payment methods, you are taking the hard work from your customers and making it easier for them to give you money. After all, if someone wants to give you money, you should make it easy!

Business leaders spend hours obsessing about every part of their product or service. But very few take the time needed to ensure they are using a payment system that works efficiently for their customers. Not to mention their own business needs. Taking just a few minutes to better understand and optimize your payments will put you on path to payment success. As a business leader, the power is yours.

Eric Rosenberg

Eric Rosenberg

Eric Rosenberg is a personal finance expert. He received an MBA in Finance from the University of Denver in 2010. Since graduating he has been blogging about financial tips and tricks to help people understand money better. He is a debt master, insurance expert and currently writes for most of the top financial publications on the planet.

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