What Are the Pros and Cons of Each? — Backoffice (2022)

Let’s say you’re a professor of film studies and you need access to the text on Dont know Cher Horowitz’s character and the construction of the female antihero. You might drive to a colleague’s house to pick up a copy, request delivery by mail or interlibrary loan, or access scanned copies online. Your decision may be based on the cost efficiency, speed of delivery and security of the delivery method.

Security, cost and speed are also some of the factors that business owners may consider when deciding whether to use automatic clearinghouse transfers (ACH) or other types of electronic funds transfer (EFT) to send and receive electronic payments. A subset of EFT, ACH transfers provide cost efficiency and security in exchange for slightly longer processing times than other types of EFT require.

What is an electronic funds transfer (EFT)?

Electronic funds transfer is, as the saying goes, the movement of funds from one bank account to another, electronically or digitally. ATM deposits and transactions, wire transfers, credit card transactions, ACH transfers and direct deposits are all examples of electronic funds transfers.

What is an automatic clearing house (ACH) transfer?

An ACH transfer is a common type of EFT. It is a transfer sent through the ACH network, an electronic network that acts as an intermediary between financial institutions. The ACH network is responsible for processing and arranging ACH transfers, and is maintained by an organization called the National Automated Clearing House Association (NACHA), a 501(c)(6) not-for-profit association connected to approximately 11,000 different financial institutions.

EFT vs. ACH: How do they compare

An ACH transfer is an EFT made using the ACH network. For this reason, all ACH transfers are EFTs, but not all EFTs are ACH transfers.

Wire transfers, credit card transactions, and ATM transactions, for example, are types of electronic funds transfers that do not use the ACH network. These transfers are classified as EFTs, but not as ACH transfers.

While ACH transfers have many similarities to other types of EFT, the cost, speed and security parameters vary by EFT method. Understanding the pros and cons of each can help business owners determine which type of transfer best suits their needs.

cost

How are they similar: Both ACH and EFT may involve processing fees calculated either as a flat rate per transaction or as a percentage of the total transaction. Transfer fees are determined by your bank or by a third-party payment processor such as PayPal or Zelle.

How they differ: ACH transfers are processed in batches, which means they tend to come with a lower cost per transaction than other types of transactions. EFTs, like credit card payments and wire transfers, for example, often come with high per-transaction costs—in the case of wire transfers, it can be $15 or more per transaction.

Speed

How are they similar: Both ACH transfers and other types of EFT are efficient ways to send money, especially when compared to methods like sending a check or sending funds in person.

How they differ: The same batch processing that reduces ACH transaction fees can make ACH transactions slower than other types of EFT. Wire transfers, for example, can happen instantly, while ACH transactions often take one to three business days to complete.

Safety

How are they similar: Both ACH transfers and other types of EFT offer security advantages over non-electronic payment methods, as they eliminate the potential for paper checks getting lost in the mail or piles of cash being lost.

How they differ: Because ACH transfers are processed through a central clearinghouse, they offer an additional layer of security in fund transfers that is not guaranteed by all types of EFT. ACH processing times allow either party to stop a transaction if necessary, and the ACH network encrypts account numbers and routing to protect the personal financial information of both merchants and consumers.

Some EFT methods, such as wire transfers and credit cards, are more often involved in fraud cases because they are more difficult to reverse: ACH’s longer processing time may allow business owners or financial institutions to stop transactions during payment processing if fraud occurs. suspected or identified error.

Transfer limit

How are they similar: Both ACH and other types of EFT are often subject to transfer limits, which can be calculated per day, per month, or per transaction. This limit is determined by the financial institution involved in the transfer.

How they differ: ACH transfers often have lower per-transaction limits than wire transfers, making them less suitable for transferring large amounts. ATM transactions also often carry daily limits, and some credit card companies impose daily limits on spending in addition to limiting the cardholder’s balance to a set credit limit.

EFT vs. ACH FAQ

Is EFT faster than ACH?

Some types of EFT are faster than ACH transfers. ACH transfers are processed in batches through a central clearinghouse and can take one to three business days to arrive in the recipient’s account. Wire transfers can be processed instantly and debit card, credit card and ATM transactions are also usually completed in less than 24 hours.

How long does EFT take?

EFTs usually take between one and three business days to complete, depending on the type of transfer. Wire transfers, debit card transactions and ATM withdrawals all take about one business day, while ACH transfers can take up to three business days to process.

Is EFT the same as a bank transfer?

A bank transfer—also known as a wire transfer—is a special type of EFT in which funds are transferred directly from one account to another, without collection or processing, through a central clearinghouse or third-party payment processor. Bank transfers tend to have a higher cost per transaction than ACH transactions (another type of EFT) and are usually processed within 24 hours.

source: https://www.shopify.co.id/blog/eft-vs-ach-what-are-the-pros-and-cons-of-each