“Check 21” is a short term for The Check Clearing for the 21st Century Act. This 2003 federal law allows checks to be processed by digital image instead of physical paper. An image of a paper check is used as a substitute and sent to a bank for deposit. This “virtual check” is accepted and processed by banks as the real document.
Benefits of Check 21 vs. ACH
While ACH offers a similar check processing service, it is more restrictive than Check 21. Many merchants have found Check 21 to be a better alternative.
Receive Money Faster
When you accept payments by ACH, the processing is handled through a broker. This slows down the process of receiving funds. Check 21 is a bank-to-bank transaction, and you are dealing directly with the customer or client. Your funds can be received the next day when processed during business hours.
When a check is processed through ACH, it is protected by a more restrictive set of rules for returns and chargebacks. For example, the dispute window for ACH customers is 20 days longer. These extra rules make it harder for merchants to protect themselves from risk and fraud.
Check 21 payments also allow you to be very descriptive about the transaction on the customer’s bank statement. This eliminates questions from the customer about the check. Many chargebacks occur because of the vague appearance and descriptions of ACH transactions on their statement. They simply can’t determine who the payment is being made to and for what product or service. If they can’t remember the purchase, it will be disputed.
Check 21 allows you to process far more types of checks than ACH. ACH can only handle consumer checks from traditional banks. With Check 21, you can take a wider variety of payments, including travelers checks, business checks, credit card checks, cashier’s checks, government checks, and even third party checks. Check 21 can also process money orders and checks drawn from credit unions or brokerages. This flexibility can help you serve more customers by accommodating more methods of payment.
If your business is classified as high-risk, you have probably been unable to get approval to process ACH payments. This might be keeping you from reaching certain customers. Most high-risk merchants are able to get approval for Check 21 processing.
CDKPay Offers Check 21 Processing
What business have you missed by limiting payment options? We can walk you through the entire check 21 application process, so that you can begin processing checks and start gaining more customers.
CDKPay is experienced in helping businesses find the right merchant account for your business model.