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February 24, 2023 [molongui_author_box]

ACH Return Codes and How to Make them Helpful

Key Takeaways:

In this article we will take a closer look at ACH payments, with particular focus on the list of ACH return codes.

ACH return codes are an important category of signals indicating the key issues behind ACH returns. ACH payments are a major payment type in the US. That is why companies need to pay attention at every ACH payment returned and analyze the return reasons.

ACH Return Concept Revisited

If you are familiar with the concept of ACH returns, then you can just skip this section and read on.

ACH is an automated clearing house, a nation-wide payment system operating in the US. Most US merchants accept both credit card and ACH payments. ACH payment system relies on trust. In most cases, processors cannot immediately verify whether funds are available and account details are correct for every ACH payment. That is why the clearing house advances the respective payment amounts to the merchant, that submits transactions.

After payment submission, the ACH operator verifies the account details and availability of funds on the specified bank account. If the account details are incorrect and/or the payment amount is not there, then the merchant has to return the funds. ACH operator’s requirement to return the funds after the ACH transaction couldn’t be processed is called an ACH return. Sometimes the term ACH return is used to denote the whole processes we’ve just outlined.

ACH Return Codes: Definition

So, what are ACH return codes? Well, they are special codes, that indicate specific reasons behind ACH returns. The code is used to notify the processor that the merchant has to return the respective payment amount. It also clarifies the particular reason of each ACH return. Every business accepting ACH payments has to check return reason codes and their frequency.

ach return codes
ACH Return Codes

NOC and ACH return codes are the key indicators of the most common problems with ACH payments a business might be facing.

Each code includes the letter “R” and two numbers following it. If the first letter of the code is “C”, then it denotes a notification of change or NOC. It means that account details have changed, but the merchant does not have to return the money.

How to Handle Different ACH Return Codes

What happens if an ACH payment is returned? Every returned payment has an underlying issue behind it, which the business has to address in a specific way. There are some eighty different answers to the question why can ACH payments be returned. We will not describe each of these eighty potential issues, causing ACH returns. Instead, we will focus on the most common examples. So, the typical ACH return reasons are as follows.

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The Most Common ACH Return Codes

General Types of ACH Return Codes

Generally, ACH returns are caused by three kinds of reasons. First, they might result from errors of account details entry. Second, they might depend on the bank (as in the case of account closed or insufficient funds). Finally, they might result from account owner’s actions (for example, authorization revoked by customer).

ACH return codes and time frame limits, associated with them, are closely connected.

In the first two cases transaction reject happens in an instant and ACH returns arrive within two days. In the third case, verifications might take much longer (up to sixty days).

We should keep in mind that longer verification time often allows consumers and merchants to commit fraud. So, if some ACH return codes often appear in the reporting files, it makes sense for the business to upgrade its fraud protection strategies.

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Conclusions

Analysis of ACH return codes list is a crucial component of the company’s ACH processing strategy. It allows the business to optimize this strategy, update customer data in time, and adjust its ACH fraud protection mechanisms.

The overall goal of ACH return codes is to help your company minimize the number of returns and maximize the number of successful ACH transactions. Thus, these important signals allow you to optimize revenue streams from ACH payments.

Take a closer look at UniPay Gateway product that can allow you to make the most of both credit card and ACH payments you process.

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