The biggest security difference between an ACH payment and a credit card transaction is the guarantee of payment. ACH transactions can take several days before the transaction is approved. An ACH transaction is only a request.
A credit card, on the other hand, is approved by the credit card network (such as Visa and Mastercard), which verifies the credit card limit. Once this is approved (which is nearly immediately), then the funds are released as a “guaranteed funds” transaction.
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Causes for ACH Returns
When a tenant makes a payment, our payment processor (Propay) waits 3 business days (by default) to release funds* to the associated deposit account. These 3-days help to minimize the number of clawbacks that occur.
Most banks will provide an answer as to the availability of funds during this period. That said, the way the ACH system is currently set up in the US, banks are not required to reply during this period. This means that a bank may not reply with the availability of funds until after the 3-day period.
In addition to the hole, ProPay, does attempt to retrieve a balance check prior to the tenant paying in order to reduce the chance of an ACH return, but there are times that an ACH return or failure can still occur.
The most common reasons for ACH Returns are:
Insufficient Funds: this occurs if the tenant’s bank determines that there is not enough money in their account to complete the payment.
Incorrect routing number or account number: Occasionally the tenant will mistakenly enter the wrong account number or routing number.
Bank decline: from time to time, banks decline an ACH payment. Although this is rare, it can happen.
Other: On rare occasions, there can be a bank-to-bank issue that causes a decline or return.
*If you have received faster funding time, the number of hold days may have been decreased.
ACH Return Notification
When ProPay, our payment processor, is informed of a failed payment, you will be notified via email with the subject line: ACH Return. In this email, you will be provided the reason for the ACH return as well as the property, unit, tenant name, and returned payment amount.
In RentRedi, the tenant's charge will automatically be updated to reflect the returned payment and include the incurred $1.50 return payment fee.
The tenant will also be notified of the failed payment and will be invited to resubmit their payment.
ACH Clawback Process
Payments that fail after the 3-day hold may result in a deposit adjustment or clawback of funds transmitted to your account. These returned funds will be recouped from your merchant account in one of a few ways:
Deducted from your next deposit (ie: A $750 ACH charge is returned the same day as another tenant's $1000 payment is to be deposited, only $250 will be deposited)
The balance of funds will be withdrawn from your deposit account (ie: A $750 ACH charge is returned the same day as another tenant's $500 payment is to be deposited, $250 will be withdrawn from the deposit account to cover the difference)
The full ACH return amount is deducted from the deposit account, this happens when no other payments were being deposited on that day
In scenarios 2 or 3, you will receive an email from [email protected] with the subject line Withdrawal Initiated for $XXX.XX. You can find the details of any transactions and deposits from your reports in RentRedi. You can also see the return reason code by viewing the notes section of that specific charge.