An ACH delay is not the most restrictive condition a processor can impose, but it's still important to consider how it will affect your merchant account. Find out what this means for your business in this article.
What is an ACH delay?
An ACH delay is a temporary hold on an electronic deposit from an acquiring bank to your direct deposit account. Processors impose an ACH delay on new merchant accounts as a way of lowering their risk. You may be asked to agree to an ACH delay if:- You have poor personal credit
- Your merchant account is seen as high risk
- You are declaring a large average ticket
- You are asking for a large processing volume
Effects of an ACH Delay on Your Business
An ACH delay sounds a lot worse than it is. Most businesses may not even notice the extra time that it takes for their deposits to be made. This is because of two factors: consistent deposits, and business NET payment terms.Deposits are Still Consistent
If you have a constant stream of revenue from sales, it’s likely that you'll hardly notice an ACH delay once you start accepting credit cards. The acquiring bank will make deposits a few days after a batch has cleared, so it will only be in these first few days that you’ll notice that there have been no deposits. After that, deposits from previous days’ sales will be available on a consistent, rolling basis. Even though the funds from sales made one day won’t be available the next, previous funds will become available every day.NET Terms Alleviate ACH Delay Effects
Most businesses don’t need deposits to be made within 24-48 hours. Sure, it's nice to have the money from sales quickly, but it’s usually not necessary. For example: Most product-based businesses (online and physical retailers) are given NET terms by their suppliers that make it possible for them to pay for merchandise 30, 60, or even 90 days after it is received. Even with the longest ACH delays, a business with NET-30 terms would be able to pay for product on time.Effects on Tight Cash Flow Businesses
However, an ACH delay may affect some companies more than others. Businesses that have tight cash flow should avoid an ACH delay, as it will adversely affect business operation. For example: If you run a construction or home repair business, you’ll usually need to purchase materials to complete jobs. You wouldn’t be able to wait extra days for a deposit to be made from your merchant bank because you won’t be able to purchase the materials needed to start your next job. Every business is different, but most new businesses won’t have a problem getting started with a merchant account that has an ACH delay. Once you get to the point in the application process where a credit card processor would ask for an ACH delay, you're almost approved. Starting the whole ordeal over again by applying with another processor is no guarantee that you won't get asked for a delay again, and will only waste valuable time.Fast Facts About ACH Delays
As you consider whether or not an ACH delay will hurt your business, keep these facts in mind:- ACH delays are not permanent; most only last one year
- Merchant accounts are usually approved quickly once you agree to an ACH delay
- Deposits are still consistent, so funds are still available regularly
Difference Between ACH Delays and Holds
ACH delays are not the same thing as a merchant account hold. Unlike ACH delays, you won't know about holds in advance, potentially causing a significant crimp in your cash flow. Holds, also sometimes called account freezes, typically result when the processor suspects fraud. However, they can also happen for any unusual transaction activity, such as larger-than-normal sales. With a hold, your account is essentially frozen and you won't receive the funds from recent card transactions until the processor investigates. Holds can last days, weeks, or longer. In situations where the processor suspects there's a heightened risk of chargebacks, they will typically hold the funds (or a portion of the funds) for the duration of the chargeback window. If you're experiencing an account freeze, it's important to work with your processor to provide any necessary documentation to prove the legitimacy of transactions.Other Types of Restrictions
As noted in the introduction, ACH delays aren't the harshest restriction a processor can impose. In fact, they're one of the less disruptive. A more restrictive condition is called a rolling reserve, where a processor will withhold a percentage of your card sales for a fixed period of time. When opening your new merchant account, be sure to review the conditions of any restrictions placed on your account, and be clear whether you're receiving a rolling reserve or an ACH delay.
Ben Dwyer
Ben Dwyer began his career in the processing industry in 2003 on the sales floor for a Connecticut‐based processor. As he learned more about the inner‐workings of the industry, rampant unethical practices, and lack of assistance available to businesses, he cut ties with his employer and started a blog where he could post accurate information about credit card processing. As the blog gained in popularity, Ben began directly assisting merchants in their search for a processor. Ben believes in empowering businesses by providing access to fair, competitive pricing, accurate information, and continued support. His dedication to transparency and education has made CardFellow a staunch small business advocate in the credit card processing industry.
