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What Is ACH Payment Processing & Is It Beneficial to Nonprofits?


As a nonprofit organization, every avenue you can potentially accept revenue through is worth exploring. You never know who will make a purchase or a contribution, so being prepared for any form of payment is a great idea. ACH payments are essentially electronic checks which cut out many of the middlemen present in other types of payments. You can collect ACH payments in person or with your online payment system for nonprofits. 

Let’s go! 


What Is ACH Processing?

When you take an ACH payment, you get the routing number of the account directly from the individual who holds it. The information is sent in a batch to the Automated Clearing House, which is the main system that agencies use to transfer funds electronically. Your patrons can choose from their checking or savings accounts and save you the hassle of pricey interchange fees. 

Pro Tip: Generally speaking, it is donors who will be most inclined towards ACH payments, especially if they are donating large amounts to your organization. Members might be interested, especially if their membership fees are frequently due. Patrons who purchase merchandise or services from you might not want to go to the hassle of giving out such sensitive information. First-time customers are the least likely to utilize this method. Thus there are a handful of benefits with ACH payments, but also some downsides. 


Main Differences Between Credit Card and ACH Payments

The differences between credit card and ACH payments really come down to the middlemen that make each type of payment possible, and the percentage of fees, processing time, and fraud protections that incur as a result. 

Credit Card Payments 

ACH Payments

Processes immediately

Takes 2-3 business days to process

Utilizes payment processor to authorize 

Is Authorized by the ACH

Payments can be disputed

Payments cannot be disputed easily

Fee 2.3% + $.30 on average per transaction

Fee only $.30 on average per transaction

When it comes to credit card transactions made toward your organization, everyone gets a cut, including your payment processing company of choice, like Braintree, DonorBox, Dharma, or Springly, and the credit card network (for example Visa or Mastercard) involved in the transaction. In contrast, only the Automated Clearing House is involved in ACH payments.

ach-payment-processing-for-nonprofits-differencesMatt is getting his nonprofit set up for ACH payment processing!

Credit card transactions are generally processed right away due to the network that the processing companies are a part of. They access the database in real-time, the instant a card is in a terminal or its information is entered online. ACH payments must be sent out for processing, so it takes them a bit longer to go through. People will not be as readily able to dispute the charges, since it requires a higher level of security to have your routing number handy - it would be much more difficult to convince the bank that the transaction was fraudulent. 

Donors especially will nonetheless appreciate the fact that the majority of their money is going to you when they donate via ACH payment. In fact, there really is no downside to gifting large monetary sums this way; as long as your donors are happy with their contribution and their banking information is protected, the amount of time it takes to process their donation is negligent. They really cannot go wrong with this method.


Advantages of ACH Payment Processing for Nonprofits

The most important thing to note is that transaction fees are significantly lower with ACH payments than they are with other methods since payments have to go through fewer gates in order to reach your account. PayPal, for example, charges 2.2% + $.30 per domestic transaction. Many providers for ACH processing have flat rates, and they range from $.20 to $.75 per transaction. Some of the providers even offer free payment processing for nonprofits. Let’s look at this more closely with an example:

Let’s say that you are paying 2.5% out of each transaction in credit card fees. If you earn $5,000, $125 is deducted from that total. Out of a million dollars, you pay more than $25,000 in credit card fees. The money you garner in donations and sales is intended to serve the higher purpose your organization has set out to fulfill. Over several years, by utilizing more and more ACH payments, you could grow your impact considerably with all the money you save.

Amount of money raised






Amount owed in credit card fees at 2.5% per transaction






As you can see, over time, credit card fees can grow exponentially. The more your organization earns, the more staggering the numbers look. Any chance you get to reduce that number will save you in the long run, which makes ACH payments well worth exploring. 

Pro Tip: If patrons are used to paying by check as opposed to something like PayPal, the transition to ACH payments will be seamless. They are paperless, which is environmentally conscious, and they allow users to issue checks remotely. They can be automatic, so they can still be used for monthly memberships fees or any other yearly fees associated with your organization. 

When you accept these payments, patrons can still enact a transaction in-person without having their card present. Their information will still be every bit as safe as it is in a credit card processing system. This makes life very easy for the customers who do enjoy this form of payment, and you may even wish to educate donors about this option. If they support your organization, they may be interested in helping you out in this small and easy way. 

Disadvantages of ACH Payment Processing for Nonprofits

This is not one of the most familiar payment options out there by a long shot. Therefore, it may be a bit difficult to convince your donors to try it out. Most of the time, it is not the customer paying the transaction fees, so they may not understand how much the extra cost hurts your organization. They unfortunately have no reason to know about ACH payments. 

ach-payment-processing-for-nonprofits-disadvantagesSalma is having a think on the disadvantages of ACH payments.

Not only that, the process of giving out sensitive data like their account details may be burdensome and scary to many contributors, and they may be reluctant to do it. They may also not have access to this information at the snap of a finger. If they provide information that is even slightly wrong, or if the member of your organization who inputs their data does so incorrectly, the payment will not go through, and because there is a long response time for payment failures, such as there being insufficient funds in the account or the account number being incorrect, you will not know for a number of days. An error such as this could therefore prove to be costly if you have no way of contacting the person who originally tried to make the donation. 

People do not like the fact that ACH payments do not have to follow the same PCI-compliance guidelines as credit card processing, although the Automated Clearing House does have its own set of strict rules. One of the reasons people enjoy services like Stripe and PayPal for charity donation processing is the fact that people know they are secure, and money is easily refunded once disputed. Although everyone involved in an ACH transaction is required to make traceable efforts to keep any sensitive information safe, they take a long time to investigate disputes of fraud. People may therefore remain far more comfortable with credit card processing.

You also will likely need a specialized system to implement the ability to accept ACH payments. Some charity payment solutions do not have integrations for the systems you will need, and it is not a good idea to rely on several systems for your main revenue acceptance. They may not integrate well, data may not carry over automatically, and you may then find that you have too much data to manage, and you will have to learn how to use both, at the expense of time and unnecessary effort. If you have not yet purchased a payment solution, and you are interested in being able to take ACH payments, be sure to check that they are viable with your solution and that it makes processing them easy! 


Final Thoughts

Accepting ACH payments may very well be crucial for nonprofit organizations that want to gain the most revenue from each transaction made toward them. ACH payments often become one of the most familiar payment options to recurring donors because of the advantages they pose to people who donate large sums of money. The process of submitting ACH payments is very secure, although your donors may initially be uncomfortable with sharing their banking information. As is the case with bill-paying, only people who are very committed to sending you money will be comfortable with this method of payment!


Springly is trusted by over 20,000 nonprofits to help them run their organizations on a daily basis. Try it, test it, love it with a 14-day free trial!


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