The process of clearing an eCheck payment can take anywhere from 24 hours to 7 business days for domestic transactions. This is because an eCheck payment must go through the ACH process, which includes several steps and multiple entities. Here, we break down what that looks like and the average processing times for different payment systems. We will also examine some steps you can take to speed up the process.
How Are eChecks Processed?
When a customer places an order on your website via an eCheck, it must follow the parameters of the Automated Clearing House (ACH). The ACH is an electronic funds transfer system that is governed by NACHA – the National Automated Clearing House Association. The ACH network includes more than 10,000 financial institutions and facilitates the transfer of funds between them on behalf of consumers of merchants.
When an eCheck transaction is initiated, there are several pieces of information needed to process it. Those include:
- The originator’s bank account number
- The originator’s bank routing number
- The receiving bank account number
- The receiving bank routing number
Moving money from one account to another requires diligent checks and balances to ensure that the funds arrive safely in the correct account. Many banks require more than these four data points to make the transfer, but these are the basics.
When a customer enters their ACH information into your payment portal, your payment processor encrypts the data and sends it to your customer’s bank. The bank will verify that the information is accurate, the consumer is the account owner, and there are sufficient funds to cover the purchase. Once verified, the customer’s bank will send a confirmation back and the ACH will pull funds from their account and deposit them into your merchant account.
How Long Do eChecks Take to Clear?
Although eChecks are a convenient and safe way to pay for goods and services, they aren’t always the fastest. Some processors can complete the payment in as little as 24 hours, while others take as many as 7 business days to clear.
Merchants should talk to their payment processors about the timeline for eChecks to understand how it might affect their cash flow. If you do a large volume of business via eChecks, your cash flow can be severely impacted by processing times.
Consumers in Canadian using Candian eChecks might have different settlement schedules depending on their local banking regulations and operations.
How Long Do eChecks Take to Clear PayPal?
Most eChecks sent via PayPal take 5-7 business days to clear the bank. In addition to the ACH parameters around eChecks, PayPal also has their own standards and procedures. In many cases, PayPal holds funds for an extra day or two. This gives them time to investigate each payment and make sure it’s not fraudulent.
How Long Do eChecks Take to Clear Stripe?
Stripe eCheck payments can also take up to 7 business days to clear. The payments must go through the normal ACH process and meet the Stripe eligibility criteria. High risk businesses often have more stringent criteria and therefore take longer to clear. Additionally, Stripe only processes payouts once per week, on the day of the merchant’s choosing. This adds a few days to the processing timeline, as well.
How Long Do eChecks Take to Clear Square?
eChecks processed by Square take from one to six business days to clear. As with other providers, this is due not only to internal processing standards but also to the ACH process.
Why Do eChecks Take So Long?
eChecks take longer than other online payments for several reasons.
Reason #1: As described above, there are a variety of steps that must happen for an eCheck payment to be processed. The information entered into the payment portal must be encrypted and verified by multiple entities to ensure accuracy and reduce the risk of fraud. Although it can be frustrating for merchants and consumers, most of the steps involved are for the protection of both.
Reason #2: The ACH uses also batch transfers, meaning payments are settled in groups, rather than individually. Some processors have the option to pay an additional fee to process same-day transactions, but that’s not always the best choice for your business. Talk to your processor to see what options are available for you and what the additional fees might be.
Reason #3: eChecks depend on financial institutions for processing, so weekends slow the process down even more because most banks aren’t available. Bank holidays affect payment processing times, as well.
Reason #4: Some banks have limitations on the transaction amount for eChecks. If your customer is trying to make a purchase for more than their bank allows via eCheck, the payment could be stuck in limbo for several days.
Reason #5: Many banks have additional steps that payments must go through if they are from an account that is out-of-state or out-of-country. If you do a lot of online business and have customers from other states or countries, your processing time will be longer.
This isn’t an exhausting look at the reasons for eCheck processing times, but it does present some of the most common ones. As a business owner, it’s important to talk to your processor about settlement times and find out if there are things you can do to decrease the timeline. In many cases, there are!
How to Speed Up eCheck Processing
There’s no magic bullet to increase eCheck processing times and send money instantly. However, there are some things that merchants can do to reduce mistakes that cost time and potentially money. Here are some things you can do to make sure your process is smooth.
Keep Your Originating ID Near the POS. Your originating ID is an ID number for your payment processor that can be given to your customer’s bank. If the initiating bank declines the first attempted purchase for error code R29, you can send the ID to them to make sure the customer’s account can allow withdrawals from your business. Then, your customer can try the transaction again and it should go through.
Understand Common ACH Reject Codes. Learning the common rejection codes and how to handle them can reduce delays on eCheck processing. Addressing them right away can help your customers feel more confident doing business with you. It can also decrease the likelihood of losing the sale and the customer.
Use Upfront Payment Verification. The majority of the eCheck processing time is spent on verification of purchase details. If you choose a payment processor who offers upfront verification, the process will be shorter and more efficient. With this benefit, your processor will verify the payment information from the customer before the purchase goes through authorization or any other steps.
Know Your Cutoff Times. If you offer same-day processing, be sure to check the cutoff times from your bank. There is typically a schedule for merchants that indicates the latest time when a transaction can be processed in order to get the funds on the same day.
eChecks are a safe and inexpensive payment option for merchants to offer. In most cases, the fees for eCheck processing are much lower than for credit or debit card payments. As a business owner, you can choose to pay additional fees to expedite eChecks, but it can defeat the purpose of using this option in the first place. If you can manage your cash flow in a way that accounts for the lengthy processing time of an eCheck, it’s usually worth it.