Merchant Fees: Debit/Credit vs ACH - What's the Difference?

For many businesses, merchant fees are simply a cost of doing business. Every time a customer uses a credit card to make a purchase, the business has to pay a fee. In the retail and ecommerce industries, ACH payments are typically processed through an app or platform, such as the SmartPay Rewards app that offers bank payment options for gas station customers at the pump.

The key difference between debit/credit cards and ACH payments is the fee structure. Under federal regulations, credit card issuers can only charge a maximum of 21 cents plus 0.05 percent of the transaction value for debit card transactions. In contrast, ACH fees are generally much lower than those associated with credit card transactions.

Convenience Fees vs Surcharges: What's the Difference?

A convenience fee is charged by businesses to cover the costs they incur when a customer pays using a credit card. This fee can be a fixed amount or a percentage of the sale. Convenience fees are often used to recoup some of the costs associated with electronic payment processing.

On the other hand, a surcharge is simply a charge for using a credit card, and is not related to any specific cost incurred by the business. Surcharges are typically prohibited by credit card networks, and can result in penalties or fines for businesses that impose them.

ACH Electronic Debit Payments: What Are They?

An ACH electronic debit payment, also known as ACH autopay or an ACH withdrawal, is a type of payment that pulls money from a customer's account when a bill is due. This type of payment is often used for recurring transactions such as utility bills or subscription services.

The Benefits of ACH Payments

For merchants, ACH fees are generally lower than those associated with credit card transactions. Additionally, the more volume a merchant can process via ACH, the more money they can save on transaction costs. This makes ACH payments an attractive option for businesses that have high volumes of electronic transactions.

In conclusion, merchant fees for debit/credit vs ACH payments are a complex topic with many nuances. While credit card transactions are subject to specific regulations and fee structures, ACH payments offer a more cost-effective solution for merchants. By understanding the differences between convenience fees, surcharges, and ACH electronic debit payments, businesses can make informed decisions about which payment options to use.

Merchant fees debitcredit vs ach