ACH Payments or Virtual Cards: Which is the best option for your business?

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In today's digital world, Paymerang helps businesses with several options for paying their vendors. As checks become increasingly obsolete, two popular methods are ACH payments and virtual cards. While each method has risks and benefits for business-to-business transactions, virtual cards often provide superior advantages.


Payment Methods Defined:

  1. ACH Payment: An ACH payment is an electronic transfer of funds between bank accounts within the United States. It is a method of moving money from one bank account to another, often used for various financial transactions such as direct deposits, bill payments, business-to-business payments, and person-to-person transfers.
  2. Virtual Card Payment: This transaction is made using a virtual or digital payment card, which is a digital representation of a physical payment card. Virtual cards are typically used for online or remote transactions where the actual physical card is not present.

ACH Payments vs Virtual Card Payments:

Compared to payments made via ACH, virtual cards possess a competitive advantage in the following ways:

  1. Greater Efficiency: Virtual card payments expedite payment processing, which optimizes efficiency and minimizes the time and effort required for gathering and managing vendor data and banking details.
  2. Increased Security: Virtual cards mitigate fraud risk and reduce unauthorized use by providing unique 16-digit card numbers for each transaction. In 2022, ACH payments fraud accounted for 30% of overall payment fraud activity, making the need for secure digital methods more critical. With virtual cards, bad actors' attempts are minimized as the card numbers are easily generated, assigned, and tracked. 
  3. Faster Transactions: ACH payments typically take 1-3 business days to process, which may be a problem time-sensitive transactions. Virtual card payments are usually processed in real-time, ensuring immediate availability of funds for vendors, enabling quicker transactions.
  4. Hassle-Free Reconciliation: Virtual cards provide enhanced transaction details and automated reconciliation, streamlining the process and reducing manual effort. Using unique card numbers offer real-time visibility and accurate tracking, making them a more efficient payment method for reconciliation than ACH payments.
  5. Cash-Back Rebates: Businesses can earn quarterly cash-back rebates on payments made via virtual cards. This allows businesses to add an additional revenue stream that helps improve their bottom line.

Continue to read more on the differences between ACH vs Card Payments here.

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