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Perils of ACH payments

Remember the days when people actually kept a check register and they knew how much money was in their bank account at all times? Those truly were the old days. Today, we continue to spend money if there is money in our accounts...even if there are outstanding payments that will cause an overdraft.

For landlords and property mangers, ACH had become a financial juggernaut. If you use a merchant services platform to collect rent, the ACH payments will be deposited into your account only to be withdrawn a week later. If you haven't assumed that a specific % of your payments will be recalled due to insufficient funds, you may be in a bind.

For uninformed residents, they are surprised when they find that their payment was rejected for insufficient funds. The bank balance was sufficient for the rent payment when it was made and since there was no check register to remind them that they paid the rent, they spent the same money 2 to 3 times. Then, the rent payment was rejected for insufficient funds.

The waterfall of financial consequences affects the landlord, resident and any other recipient of funds downstream. The Automated Clearing House "ACH" system was established in 1972 and used in its original form it is a dinosaur compared to Zelle, Venmo and CashApp which use the ACH platform, but provide faster results.

Hope is on the horizon! In 2023, the Federal Reserve’s FedNowSM Service will roll out round-the-clock, real-time funds availability to expand access to instant payments features. This will revolutionize B2B payments in the same way that Venmo and CashApp have revolutionized peer to peer payments, but heck, we have all been using Venmo and CashApp anyways.

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