Automated Clearing House (ACH) payments can be a convenient payment method – particularly if your business works with invoices, collects recurring payments, or sells big ticket items.
Also known as direct bank transfers or direct deposits, ACH payments are almost always cheaper to process than wire transfers, checks, and credit card payments.
ACH payments use the bank’s routing number and the customer’s bank account information.
They are not authorized in real-time like credit card payments, and they can be rejected – in which case you may be charged an ACH reject fee.
ACH rejection fees (or return fees) are fees that are assessed when your payment processor attempts to pull funds out of your customer’s bank account, but the bank rejects the transaction for whatever reason.
ACH reject fees are typically between $2 and $5 per rejected transaction, and they are billed the month following processing.
Let’s look at the most common reasons ACH payments get rejected.
Common Reasons for ACH Rejects
When an ACH payment is rejected, you receive an ACH reject code – usually within 2 to 4 business days. Some common ACH reject codes are:
- R01: Insufficient funds. The bank account you’re trying to pull funds from doesn’t have enough funds.
- R02: Bank account closed. The bank account was closed.
- R03: No bank account or unable to locate account. The bank account does not exist, or the payment processor is unable to locate it.
- R04: Invalid account number structure. The bank account details provided are invalid.
- R07: Customer revoked authorization. The customer has revoked authorization for the ACH transaction before it was processed.
- R29: Corporate customer advises not authorized. The customer claims that no authorization had been given in the first place.
How to Handle ACH Rejects
If you receive an ACH reject, it’s important to investigate what happened – in most cases, you should be able to correct and resubmit the transaction, get it approved, and avoid being charged ACH reject fees.
Use the ACH return code to determine the cause of the ACH rejection. In most cases, you can resolve the issue by contacting the bank and/or the customer so they can correct the mistake.
Accept ACH Payments with Gravity
With Gravity Payments, you can accept ACH payments as part of our merchant services.Contact us if you have any further questions about ACH reject codes, and learn everything you need to know about ACH payments in this article.