ACH, or Automated Clearing House, is a payment method that runs on banking networks in the United States. It allows customers to pay for transactions by debiting directly from their bank account, as opposed to processing through a card brand.
ACH Direct Debit is currently in limited release and is only available for merchants who:
- Are domiciled in the United States
- Are processing with Braintree Direct
- Are in good standing (i.e. not on a chargeback program)
- Transact in the US in USD
For information on setup and access, email email@example.com.
For ACH Direct Debit, you're required to verify a bank account before collecting money from it. Verifications provide a way for you to check the validity of a bank account before attempting to process a transaction – helping you reduce the risk of fraudulent or erroneous transactions.
Braintree offers 4 different verification methods. You can use just one, but we recommend implementing at least one backup method in case the first method fails.
Network check verifies your customer's bank account by requiring them to enter specific account information (e.g. routing number, account number) at checkout. While this verification method does provide instantaneous verification, it is not supported by all banks.
Micro-transfers require your customer to first enter their bank account information (e.g. routing number, account number), and then confirm the amounts of two deposits we send to their provided account in a custom UI built by you. This verification process typically takes 2-3 business days and requires two separate actions from the customer.
While micro-transfers require additional developer work to build a UI for collecting the deposit amounts from your customers, they provide the most accurate bank verification method.
Tokenized check leverages a connection through a third-party provider, Plaid, to present customers with their bank login UI at checkout. This verification option allows your customer to enter their bank login credentials instead of providing their account and routing numbers to you. While this verification method does provide instantaneous verification, it is not supported by all banks.
Using tokenized check requires that you sign up and manage your own account with Plaid. Sign up on their website.
If you'd like to manually manage verification, you can do so with independent check. There are two options:
- Collect physically voided checks to verify the account
- Use another third-party verification provider
While this verification option gives you the most flexibility, it can also be the riskiest. If your independent method doesn't accurately verify accounts, it may negatively impact your transaction approval rates in the long run.
If you choose to verify bank accounts using the network check, micro-transfers, or independent check methods, one of the fields we require you to collect is the account ownership type, which can be either business or personal. While you can process transactions on both types of accounts, it's important to record the type for each account accurately.
When an ACH transaction is sent to the banking network, it will get marked with a specific code called a Standard Entry Class (SEC) code – indicating whether the account is a personal or business account. If you submit a transaction with the wrong account ownership type, the bank may decline the transaction request (commonly referred to as a return).
For example, if a customer's account is a business checking account and has a debit block in place, the block would prevent transactions coded for personal accounts from going through. As a result, if you submit a transaction for this account with an ownership type of personal instead of business, the bank will return the transaction.
If a transaction is returned for this reason, you'll be charged a return fee and will have to either:
- Resubmit the transaction with the correct account type
- Ask your customer to call their bank to get the debit block lifted from their bank account – they'll need to provide their bank with the following company IDs:
ACH is a batch-based system, meaning that transactions do not take place in real-time, and authorizations or captures do not exist as they do with credit card transactions. This makes it more difficult to verify whether funds will be available in the account at the time the transaction takes place. Because of this difference, the settlement and funding timeline is different from standard credit cards.
- Settlement Pending: The transaction was successfully submitted to the banking network
- Failed: An error occurred when submitting the transaction
- Settled: The transaction has been verified by the banking network and the funds will be disbursed to you
- Settlement Declined: The transaction was returned by the banking network and the funds will not be disbursed to you – a $5 USD fee will apply
Before we disburse funds to your account, we must wait for the customer's bank to confirm and withdraw the funds from their account – which can take up to 5 business days. If we are notified that the transaction can't be processed (which is often referred to as a return), the funds will not be disbursed, and it will be up to you to follow-up with your customer for payment. If the designated window passes and the transaction is not returned to us, we assume the transaction is valid and will disburse funds to you.
Here's a more detailed timeline for what the ACH transaction lifecycle looks like:
- The transaction is processed and is immediately given the Settlement Pending status
- We wait for the bank to confirm or return the transaction
- If the transaction hasn't been returned by the banking network, the transaction will remain in the Settlement Pending status
- If the banking network returns the transaction, it will be moved to a Settlement Declined status, and you will be notified
- If the transaction has not been returned by the end of the day, the transaction will be considered good and given the Settled status
- If the transaction is returned, it will be moved to a Settlement Declined status
- Regardless of the result, you will be notified of the status change on this day
- We disburse all Settled funds to your account
- Disbursed funds should be reflected in your bank account alongside any disbursed credit card transactions from that day
Transactions processed with ACH have an additional processing fee, which can be found in your pricing agreement. A $5 USD fee will be charged for any returns or disputes.
ACH transactions can't be voided at any point in the transaction lifecycle. Refunds can be processed, but only on transactions with the Settled status.
If you'd like to cancel a transaction, you'll need to wait for the transaction to settle and then issue a refund. If you issue a full refund, we will return the fees from the original transaction.
Customers have a specific window of time to report disputes to their bank for unauthorized transactions – commonly referred to as unauths. This window varies depending on the type of bank account they have.
- Business bank accounts: 2 calendar days
- Personal bank accounts: 60 calendar days
Disputes reported within the given time window are automatically awarded to the customer (in compliance with the Federal Reserve Regulation E) – and require no action from you. A non-refundable $5 USD fee will be charged for each dispute filed within the appropriate timeframe. We recommend working directly with the customer to resolve any disputes that you believe to be in error.
If a customer reports an unauthorized charge outside of the designated window, they automatically lose the dispute and you will not be penalized.
Bank accounts can be vaulted. However, Braintree's recurring billing currently does not support repeat payments with bank accounts.
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