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What is a ACH Check Conversion?

What is a ACH Check Conversion?

What is a ACH Check Conversion? Have you ever paid for a transaction with a check, but then you have reviewed the code on your statement and it appears to have been paid from your account electronically? This sort of thing happens from time to time and there are numerous ways your checks may be converted into electronic payment/transaction items. In general, if your check is converted, it will be converted through an Automated Clearing House (ACH) network, which is the most common way that money is digitally moved in the USA.

In this article on, “What is a ACH check conversion?” we first cover the many occasions where your check payment appears as an ACH transfer on your bank statement. Once we have covered that issue, we move on to the more popular issue of check conversions to ACH because of mobile check deposits and merchants using check scanners.

“Mobile check deposit” is a function that many banks now offer where you may photograph a check and send the image of it to your bank (usually via their app) and deposit it that way. Merchants are able to do a similar thing in their stores with a scanner. Mobile check deposits and merchants scanning checks are the two most common ways that paper checks are turned into ACH transfers. To start with, here are the numerous reasons why a paper check may appear as an ACH transfer on your bank statement.

Returned Checks

A check that is returned (bounced) may turn up on your statement as an ACH debit. The reason for this is because it is the fastest way for businesses to collect the funds required to cover returned items.

Point Of Purchase or Point Of Sale

If you use a check to buy something in a store, the merchant may scan the check and have you sign the receipt and then hand the check back to you. In this case, the check is converted into an ACH payment.

ARC Items

Large billing companies such as credit card companies and utilities may have checks converted into ACH debits on your account. It allows them to collect your money a little faster if you have mailed a check into them. A company is supposed to warn you in advance if it is their policy to turn their account receivable into ACH debits.

Over The Phone

If you use an electronic check to pay for something over the phone, then these entries on your bank statement may appear as ACH transfers. In this case, an electronic check is converted to an ACH transfer that debits money from your account in as few as two days.

Over The Internet

If you used an electronic check to pay for something over the Internet, then it may appear as an ACH transfer on your bank statement. An e-check may be used over the Internet so that your bank details or credit card details need not be shared with the website you are buying from. The debit usually hits your bank account within around two days.

Disaster Transfers

In the event of a disaster such as a fire, hurricane, plane crash, etc., checks may be destroyed and subsequently cleared via ACH transfer. It shouldn’t make a difference to you if the recipient has already put the check into his or her bank account, but you will notice the check debited as an ACH payment in your account statement.

Blame Radical Muslims For The Proliferation Of ACH Check Conversion

When the 911 terrorist attacks occurred, planes were grounded and there was a significant ripple felt in the financial services sector. In order to protect the financial services industry, “Check 21” was passed into law. It is the “Check Clearing for the 21st Century Act,” and it is part of the reason why mobile check deposits are now so popular.

The law allowed merchants and banks to scan/photograph checks and cash them that way. It allows the conversion of paper checks into electronic transfers. That is why ACH check conversions are now so popular. An electronic transfer of money may initiated based on nothing more than a scan/photo of the original paper check. Merchants may do it, banks may do it, and people may also use Mobile Check Deposit functions and apps that are offered by online banks, traditional banks and credit unions.

ACH/Check Conversion Services

If a merchant decides to start using check conversion services, then it helps to protect the payments that consumers made to the merchant. A merchant is able to use Internet-based services, a merchant portal, and a check scanner to turn a check into an ACH transfer.

What is an ACH check conversion going to do for a merchant? In its simplest form, it lowers the chances of a merchant losing checks that were paid by consumers. It is also convenient, it means the merchant doesn’t have to walk to the bank to deposit checks, and it may allow a merchant to receive its payments a little faster than it would with paper checks on their own.

A merchant will have to find an ACH check conversion service if the merchant wishes to take and scan checks at the counter when taking sales. The check is converted into an ACH transfer, which means the money from the check may be drawn from the buyer’s account as soon as the day after. It may also clear in as few as two days, which is faster than a typical paper check.

Internet-Based Services And A Check Scanner

The check scanner is able to capture a digital image of the check and the MICR information. It may be able to capture the dollar amount of the check, but it is often up to the merchant to enter the dollar amount. People using mobile deposit are sometimes asked to enter the dollar amount seen on the check, but the service relies more on what it reads from the check itself rather than what the consumer types into the app.

The person who gives a check to a merchant is asking the merchant to trust him or her. The digital check scanner is able to verify the buyer’s account information, which is especially handy for catching checks that have been issued from accounts that have been frozen or closed.

The Basics of ACH Check Conversion By Merchants

A merchant that uses an ACH check conversion service will be able to process consumer checks as if they were electronic transactions. Using a scanner, the merchant captures an image and the MICR information. The information is verified with a real-time gateway, and the funds transfer is put in a queue. The queue is acted upon by an Automated Clearing House, which is what will pull the money from the buyer’s account and put it into to the seller’s account.

Converting checks in this way means that the merchant receives the funds within one to three days (in most cases). Not only does it allow the merchant to destroy the check or give the check back, it also lowers the risk of check tampering and lowers the risk of losing the check prior to it being taken to the bank. ACH check conversions also eliminate many of the liabilities and costs that are associated with paper checks. ACH check conversion may be a relatively new thing, but it is very popular to the point where more and more banks are offering mobile deposits as part of their mobile app service.

About The Author

Ash The Great

After a varied career in different industries from the hospitality industry to the financial consultancy industry, Ash now spends his days working as a professional writer.

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