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Commercial Cards vs. ACH Transactions

February 4, 2015

As more and more businesses move away from paper checks, two primary forms of e-payments are prevalent today — ACH transactions and commercial card purchases (including P-cards and virtual cards).

Which option is right for you?

Both are electronic. Both eliminate check use. Yet, for the vast majority of B2B e-payments, commercial cards yield several benefits for both the buyer and the supplier that ACH transactions just don’t match.

ACH vs. Card Payments: Comparison for Both Buyers and Suppliers
  • Implementation: With ACH implementation, each buyer/seller relationship must be set up separately with completed forms and agreements. For this reason, ACH is best for high-volume, recurring transactions. Setting up an ACH transfer for a single transaction is simply not cost effective. On the other hand, using commercial cards for B2B payments — whether for one-time or recurring payments — only requires supplying the supplier with the card number. And, if you’re using virtual cards, you can set up tight controls around the card number’s use, such as the specific charge amount, dates valid, MCC codes, and more.
  • Security: ACH transfers require the buyer to have the supplier’s bank account information. Suppliers may be hesitant to share their sensitive bank account information, especially with infrequent buyers. In contrast, with commercial cards the supplier uses the buyer’s encrypted or tokenized card information, which automatically reduces security and fraud risks. In addition, card payments for one-time use do not require suppliers to keep the card numbers on file — which eliminates Payment Card Industry (PCI) compliance issues.
ACH vs. Card Payments: Comparison for Suppliers
  • Transaction Disputes: If there is a dispute over services or returned merchandise, ACH payments can be reversed by the buyer, simply removing the money from the merchant’s account. Although suppliers can pay for the extra service of blocking ACH debits, this requires using multiple checking accounts along with additional costs and reconciliation time. In contrast, while buyers can dispute a commercial card transaction, the process allows for input from the merchant before the transaction is reversed.
  • Transaction Costs: Suppliers often think ACH transactions have lower costs than credit card transactions, but there are monthly charges for using ACH. In addition, ACH transactions are subject to Non-Sufficient Funds (NSF) fees if there aren’t enough funds in the buyer’s account, and fees for NSF transactions typically range from $20–$35 per transaction. More costs include additional employee time required to set up the ACH transactions for each buyer and employee time spent manually processing each transaction.
  • Remittance Advice: The remittance advice sent with ACH payments is usually insufficient for automatic processing and, therefore, requires manual intervention. Also some banks cannot display all the available information on the remittance advice, while others charge additional fees to display details. In addition, with ACH the remittance data is usually sent separate from payment, which complicates the reconciliation process. In contrast, card transactions come with complete detailed information and typically do not require any manual processing. Plus, with card payments, remittance details in different formats are provided free of charge; with ACH transactions, receiving remittance details electronically typically requires a separate charge to the supplier.
  • Cash Flow: Cash flow, always a concern for Accounts Receivable, is improved by card acceptance. Since commercial card transactions clear in real time, you will know immediately if a charge is approved or declined. The funds then appear in your bank account the next business day. On the other hand, ACH funds typically take 2–3 business days to appear in your bank account, and it may take 3–4 business days before you receive notice of a rejected transaction. In addition, suppliers can take advantage of reduced credit risk with card transactions over ACH. With ACH, the supplier must provide trade credit to the buyer and risk non-payment and NSF returns. With card payments, the buyer’s card provider assumes the trade credit risk, and the supplier gets guaranteed payment with real-time card approval.
ACH vs. Card Payments: Comparison for Buyers
  • More Security: When using ACH, the buyer has a risk associated with maintaining and updating the supplier’s bank account information. If current banking account information isn’t maintained, then the ACH transfer will not occur or the wrong account may be credited. With commercial cards, the buyer isn’t required to store any supplier banking information. Additionally, with ACH transactions, the buyer assumes overhead and risks associated with validating the supplier’s bank account information to comply with the Office of Foreign Assets Control (OFAC) and the USA PATRIOT Act. In the card world, the merchant bank handles all of those requirements for the buyers.
  • Cash Float: Cash float is another area where commercial cards win. With ACH, there is limited cash float; it only takes 2–3 business days for the vendor to receive funds from the buyer’s debited checking account. Some banks even require the buyer to have sufficient funds available before the ACH payments are even processed. With card payments, on the other hand, there is an average of 20 days’ float, depending on where in the statement cycle the charge is posted and the statement payment terms.
  • Rewards: Cost is another factor when considering ACH vs. commercial card transactions. Depending on your financial institution’s offerings, you may be eligible for rewards or rebates through commercial card use. Typically, the higher the spend levels put on the card, the higher the rebate percentage and dollars shared back to your company. That’s hard-dollar revenue right back to your organization’s bottom line — just for using commercial cards for electronic payments.

An organization’s AP department is typically seen as a “cost center” and is under increased pressures to cut costs and add value. With commercial cards, many AP departments have generated enough rebates to fund their process improvement capital projects like payment automation and e-invoicing systems.


When making corporate payments, it’s important to weigh your options — and the pros and cons of each — to ensure that you’re maximizing Accounts Payable efficiencies for your organization. If you’d like to learn more about commercial card payments and electronic AP, contact us today. If you’re interested, we’ll be glad to provide a complimentary assessment of your current payment processes.

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