ACH: How to Avoid Credit Card Merchant Fees Forever
You earn your money – you should get to hold onto it. But if you get paid by credit card,
you’re giving away 3% to VISA and MasterCard. Tired of that yet?
Remember, credit card merchant fees are about 3% of top line sales. But that’s the
same as 20% or more of your profit.
Want to see the math on that? If your profit margin is like most people’s (15% net profits is average) and you pay 3% of sales to VISA, then you are paying credit card merchant fees of 3 cents for every 15 cents of profit…. Or about 20% of profits just for the pleasure of getting paid.
Crazy, right? You have better uses for that much money.
Fortunately, there is a cheaper way to get paid. ACH – or the Automated Clearing House – is a common inter-bank service that does electronic funds transfers without checks or credit cards. You’ve probably used it to pay your water bill, your mortgage or car loan. If you’ve given a company permission to withdraw money from your bank account, you’re already using ACH to send money — now start using it to receive money!
If you generally charge customers at least $10 per transaction, ACH is the cheapest, easiest and most efficient way to get paid. I’m not promoting any particular solution, but here’s a few ways you can do it:
The Easiest Way is Also Free
If you use QuickBooks, you can use Intuit’s free IPN (Intuit Payment Network) service to automatically collect payments on invoices. When your customer gets an invoice, they can click a link to pay by direct debit from their checking account (this is the same as ACH or “e-check”). Under some circumstances, the fee is just $0.50 — about what you’d pay to process a $9.00 Visa card payment.
Need specific instructions how to make this work? Below is a quick video about setting up recurring ACH payments in QuickBooks. (video credit: Marc at Right Here Interactive.… Thanks Marc!)
The Competition is Fierce
OK, for those of you not on QuickBooks, take heart. There are a number of different Web-based services, some of which specifically offer recurring ACH.
Stripe is one of the most innovative payment processors, and offers an invoice-to-ACH service as well as other ways to get paid online or in person.
The larger banks offer some kind of solution for larger account holders. Rates and terms vary, but the solutions are solid. Bank of America accepts ACH payments (and more) through their $15/month service powered by “ ViewPost ”. Note that this service is quite robust with a nice dashboard and various invoicing feature.
And there are other independents also. PaySimple.com offers the stripped down basics of ACH done right. They will get you accepting ACH payments quickly and can process automatic recurring ACH payments.
Finally, the grand-daddy of all ACH transactions is Authorize.net — perfect for really large volumes and starts at $25/month. Of course, Authorize.net is owned by VISA so they’ll offer you traditional merchant services too. But ACH (they call it e-check) is available without a merchant account.
No matter where you go, expect to pay $0.10 to $0.50 per transaction when all is said and done. Unless you are charging your customers less than $10 per transaction, this will save you big money over credit cards. In fact, simple math says that you could save as much as $500 in fees for each $10,000 you process.
I’m sure there are other ACH providers. Let me know your advice below.
Dedicated to your (credit-card-free) Profits,
David
