eCheck vs. ACH: What’s the difference, and which should you choose?

Your business likely has to pay multiple vendor invoices each month, so it’s important to understand what payment options are best for your schedule, budget, and security needs. That's why it's important to know the difference between eCheck and ACH payments.

eChecks and ACH payments are both widely used to transfer funds directly between bank accounts. While they may seem similar, their differences can impact how efficiently your accounts payable (AP) team processes transactions.

In this article, we compare eCheck vs. ACH, explain how each works, and help you decide which is the best option for your business.

What is an eCheck?

eChecks, or electronic checks, are the digital equivalent of paper checks. They enable direct transfers between bank accounts through the ACH network, eliminating the need for manual check processing.

By combining the familiarity of traditional checks with the speed and efficiency of digital payments, eChecks provide a fast way to send and receive money. Businesses and consumers commonly use them for bill payments, online purchases, payroll deposits, and recurring transactions.

While eChecks and ACH payments are closely related, they aren’t interchangeable terms. The Automated Clearing House (ACH) is the network used for processing electronic payments in the U.S., and eChecks are just one form of ACH payment.

How do eCheck payments work?

eCheck payments follow a structured process to ensure secure, reliable transactions and are generally used for one-off payments. They follow strict compliance standards to protect your sensitive financial data and combat fraud.

Here’s how they work:

1. Authorization: You provide your bank account number and routing number in a secure payment portal or checkout system. Vendors must obtain explicit consent before processing the transaction, usually via a checkbox or other digital agreement.
2. Verification: The payment processor verifies the payment information, confirming sufficient funds and scanning for fraud or mismatches. Some systems debit and refund a small amount to confirm account validity.
3. Transmission: After verification of the payment details, the ACH network securely transmits them for processing. ACH transactions process in batches, keeping costs low and ensuring reliable settlement within 1–3 business days.
4. Processing: Your bank withdraws the payment amount and transfers it to the vendor’s account. Both banks finalize the transaction and update account balances.
5. Notification: Once the payment is complete, both you and the vendor receive confirmation. The vendor gets a payment receipt, while you receive an email with transaction details such as ID, amount, and date.

eCheck payment example

Say you’re a small business hiring a web developer to set up your e-commerce site. You’ve agreed to the contract terms, and once the developer completes the work, they send you an invoice, their bank routing and account numbers, and their signed digital authorization.

Once you approve the invoice, you’ll use your payment platform to issue the eCheck via the ACH network, which both banks will then process to withdraw funds from your account and deposit into the web developer’s account. Once that’s complete, you’ll both receive confirmation emails with the transaction details.

Pros and cons of eChecks

The main advantages of eChecks include:

• Convenience
• Efficiency
• Cost-effectiveness
• Security
• Ideal for recurring payments

But there are also some drawbacks, which include:

• Potential for returned payments if there are insufficient funds
• Bank account requirement
• 1–3 day clearance window
• Possible processing setup

What is ACH?

ACH payments, sometimes called ACH checks, are electronic transfers that move funds between bank accounts through the ACH network. This system processes billions of electronic transactions annually and plays a critical role in business payments, payroll, and consumer bill payments.

The ACH network is governed by Nacha, which sets the rules and compliance standards around ACH transactions. They fall into two main types:

• ACH credit transactions: ACH credits allow you to push funds to another account. Common use cases include direct deposits and vendor payments.
• ACH debit transactions: ACH debits let vendors pull funds from your account after obtaining authorization. These transactions are ideal for recurring bill payments and loan payments.

How do ACH payments work?

Like eCheck payments, ACH payments follow a standard workflow to securely and efficiently transfer funds. But while eChecks are more for one-time payments, ACH payments are often used for recurring payments.

Key security protocols such as data encryption, multi-factor authentication, fraud detection, and authorization requirements ensure that funds can be safely transferred with little risk. Nacha also provides regulatory oversight, keeping ACH payments secure.

Here’s how they work:

1. Initiation: You provide the recipient’s bank account information, ACH routing number, and the payment amount. Then, you specify the transaction type: credit or debit.
2. Request hits Originating Depository Financial Institution (ODFI): The request goes to the ODFI, the sender’s bank, which compiles the payment data into a standardized file and verifies the details before submitting it to the ACH network
3. Batch processing: Instead of processing payments one at a time, the ODFI groups multiple transactions into batches and submits them at scheduled intervals. This is more efficient and cost-effective.
4. ACH operator: The ACH operator, either the Federal Reserve or Electronic Payments Network, acts as an intermediary, sorting and routing transactions to the correct recipient banks for processing
5. Receiving Depository Financial Institution (RDFI) processing: The RDFI, the recipient’s bank, processes the transaction by debiting your account for the ACH debit
6. Settlement: With the transactions verified, banks reconcile balances through a central clearinghouse. After settlement, the banks update both account balances, and both parties receive payment confirmation.

ACH payment example

Let’s say an advertising agency hires a design contractor on a monthly retainer. The agency would like to set up ACH recurring payments, so the contractor provides their bank information and written authorization.

Then the ACH system authorizes their agreed-upon payments, scheduled for the same day each month. Once that’s complete, both receive notifications via email about the payment.

Pros and cons of ACH

The benefits of ACH payments include:

• Reliability and security
• Low processing fees
• Wide acceptance
• Environmental benefits
• Easy reconciliation

But there are also limitations, including:

• Slower processing for some transfers
• Delayed payments due to bank cutoff times
• Typically best for payments between accounts in the U.S.
• Daily or monthly ACH payment limits with some banks and processors

Differences: eChecks vs. ACH payments

Understanding the key differences between electronic checks and ACH payments can help you determine which is best for your business. Here are their main differences at a glance:

Processing speed

Typically, eCheck processing takes 3–5 business days because of verification and clearing processes. ACH payments can be quicker, settling in 1–3 business days. ACH is generally the quicker option, and you can oftne send a same-day or instant ACH payment for an additional fee.

Fees and costs

eChecks usually come at a slightly higher fee, generally between $0.10–$1.00 per transaction. ACH payments, on the other hand, can cost between $0.20–$1.50 per transaction. Both can incur additional fees for returned payments, and ACH may have higher fees for same-day transactions.

Security and fraud protection

eChecks have fraud protections similar to those that come with paper checks issued by banks. They include bank account verification, but can be at risk for fraud if not secured properly. ACH payments are considered to be more secure as they fall under Nacha regulations, require authorization, and come with fraud monitoring tools.

Best use cases

For one-time or high-value transactions, eChecks are often the better option. They’re also the best option for simpler payments. ACH payments are often best used for recurring and high-volume payments. They’re also a good option for payroll, employee payments, and automated invoicing systems.

Similarities between eCheck and ACH

Despite their differences, eChecks and ACH payments both function as electronic alternatives to traditional paper checks, offering your business an efficient way to transfer funds. Here’s what they have in common:

• Electronic transfers: Both eliminate the need for physical checks, enabling faster, paperless transactions between bank accounts
• Cost effectiveness: Compared to credit card payments, both methods offer reduced processing costs
• Security and regulatory compliance: Each follows strict financial regulations to protect sensitive data. eChecks use digital signatures and encryption, while ACH transactions comply with Nacha security standards.
• ACH network processing: Both rely on the ACH network, ensuring secure, standardized transaction processing across financial institutions
• Broad business acceptance: eChecks and ACH payments are widely used across industries for B2C and B2B transactions, making them both versatile payment options

Which method is right for your business?

Deciding on ACH payment versus eCheck depends on your business goals, customer preferences, operational priorities, and the nature of your transactions.

These are some considerations to help determine which is the best fit for you:

1. Payment frequency

ACH payments offer automated processing if your business relies on a high volume of recurring transactions, such as subscriptions, payroll, or monthly bills. For large, one-time payments such as real estate transactions or high-value vendor invoices, eChecks may be the better option.

2. Processing speed

ACH transactions can process same-day or next-day for urgent payouts and faster payments. If speed is a priority, ACH payments are the better choice. On the other hand, eChecks take 3 to 5 business days due to additional verification.

3. Cost efficiency

Both methods are more affordable than business credit cards, but cost-effectiveness depends on transaction volume. ACH payments usually have lower fees, so they make sense for high-volume, lower-value transactions. eChecks might have higher transaction fees, but are a convenient option for occasional, high-value transactions.

4. Workflow compatibility

Your payment preference should integrate with your existing systems. ACH payments integrate with existing accounting and expense management platforms. eChecks require minimal setup to use with existing banking or digital check tools. Consider the level of complexity in your transactions and your overall workflows.

5. Customer and vendor expectations

Some customers and vendors prefer eChecks for large payments, as they feel more secure using a familiar check-based system. Others favor ACH payments for automated, recurring transactions such as subscriptions or bill payments. Consider surveying vendors or analyzing past payment trends to align payment methods with vendor expectations.

When determining eChecks versus ACH payments, there isn’t one correct answer. What you ultimately decide to use depends on your business model and scalability goals.

If efficiency and automation matter, ACH payments streamline accounts payable workflows and support business growth. If simplicity is the goal, eChecks provide a straightforward alternative without complex setup requirements.

Setting up eCheck or ACH payments: Step by step

Setting up eCheck or ACH for sending or receiving payments doesn’t have to be complicated. These are the practical steps to implement either payment option:

1. Choose a processor: First, you need to find a processor or provider for either payment option. Look for integration options, fee structures, and security features for recurring or one-time payments. Compare providers to find the best fit for your needs.
2. Set up and verify your business bank account: Most processors require a business bank account for verification. You’ll need account and routing numbers and, potentially, a bank that supports ACH payments. Be sure to verify early in the process to avoid delays, either with a micro-deposit verification or secure login through the bank.
3. Ensure compliance: To initiate payments, your business must first get an ACH authorization form from your customers or vendors, keep a record of the confirmation for a minimum of 2 years, and provide a method to dispute charges. Failure to file a written authorization can lead to legal issues.
4. Integrate with existing systems: Once you pick a method, make sure it integrates with your accounting or expense management tools to automate reconciliation, track your payments, and verify timing. Providers with open APIs often integrate more smoothly.

Automate your payments with ACH and Ramp

Both eChecks and ACH payments can be a great way to pay your invoices, depending on your goals and the types of transactions. If you've chosen to use ACH to save your business time and money and improve vendor relationships with timely payments, Ramp Bill Pay can help you streamline the process.

Ramp Bill Pay, our AP automation software, streamlines the payment process by integrating ACH payments with your AP workflows. Your AP team can reclaim the time spent on manual busywork and gain real-time visibility into every step of the payment cycle.

Ramp Bill Pay provides:

• Customizable approval workflows that keep invoices moving quickly toward payment
• Invoice processing automation and one-click syncing with your ERP
• Automated 2-way and 3-way matching to catch errors quickly and easily before you pay

How much time and money could your AP team save by processing ACH payments on Ramp? Try Ramp Bill Pay and see for yourself.

This post includes general information about ACH payments. For help with ACH functionality specific to Ramp, visit Ramp Support for more details.