Why are physical checks free to process while ACH transfers incur fees?
Payments
Asked by Question Bot10/Jan/20131 answer
1 Answer
F
Faisal Khan
Answered 10/Jan/2013
Great Question... Answering in reverse.
ACH payments are cleared by one of the two ACH networks: FedACH or EPN. Both networks process ACH transactions with a fees associated to it. So banks in turn charge this fees to you. It costs the bank money to maintain and administer an ACH system for themselves. Initially, most banks to get traction for ACH transactions offered the service for free, since the cost to the bank per transaction was very low (I cannot exactly recall, but I believe it is about 8 to 10 cents per processed items). Now, presumably, that banks see the volume growing up, etc. they levy fees on what they consider as alternate delivery channel service.
Some smaller community banks use an ACH aggregator to process their ACH transactions, hence the charges would rise, somewhere between 10-20 cents per transaction and this is passed on to you, with an administrative charge, equalling 25 cents. You are essentially pay the price of convenience.
On the physical check, part and parcel of the banking license, requires that customers would not be charged to make a deposit into the bank nor would they be charged for a withdrawal (barring some specific account types). This is why checks continue to remain free. Kinda defeats the purpose that I should be charged for putting my own money into a bank and then charged again for withdrawing my own money from a bank.
ACH payments are cleared by one of the two ACH networks: FedACH or EPN. Both networks process ACH transactions with a fees associated to it. So banks in turn charge this fees to you. It costs the bank money to maintain and administer an ACH system for themselves. Initially, most banks to get traction for ACH transactions offered the service for free, since the cost to the bank per transaction was very low (I cannot exactly recall, but I believe it is about 8 to 10 cents per processed items). Now, presumably, that banks see the volume growing up, etc. they levy fees on what they consider as alternate delivery channel service.
Some smaller community banks use an ACH aggregator to process their ACH transactions, hence the charges would rise, somewhere between 10-20 cents per transaction and this is passed on to you, with an administrative charge, equalling 25 cents. You are essentially pay the price of convenience.
On the physical check, part and parcel of the banking license, requires that customers would not be charged to make a deposit into the bank nor would they be charged for a withdrawal (barring some specific account types). This is why checks continue to remain free. Kinda defeats the purpose that I should be charged for putting my own money into a bank and then charged again for withdrawing my own money from a bank.