Understanding ACH payment returns

Received an 'ACH payment returned' notification? Don't worry, it happens.

This guide will help you understand why bank payments are sometimes returned, how Helcim informs you, and provide actionable steps for handling returns for both your US and Canadian customers.

In this article

• Why ACH payments get returned

• How Helcim notifies you about returns (and the $5 fee)

• Tips for minimizing ACH payment returns

• What to do when you receive a return

• Common US ACH return codes

• Common Canadian ACH (EFT/PAD) return codes

• Next steps

• FAQs

Why ACH payments get returned

ACH payments are generally reliable, but returns can happen for various reasons, much like a paper check might bounce. Common reasons include:

• Insufficient Funds (NSF): The customer's account didn't have enough money to cover the payment.

• Account Closed / Invalid Account Number: The bank account provided is no longer active or the details are incorrect.

• Authorization Revoked by Customer: The customer told their bank they no longer authorize payments to your business from that account.

• Stop Payment Order: The customer instructed their bank to stop this specific payment.

• Customer Advises Not Authorized / Dispute: The customer informed their bank they did not authorize the transaction. This is a common reason for "failed authorizations" inquiries.

How Helcim notifies you about returns (and the $5 fee)

You’ll find out about an ACH return through the following:

• Email notification: If an ACH payment is returned, Helcim will automatically send you an email. This email will include a return code and a brief explanation of why the payment failed.

• Funds withdrawal (if settled): If the returned payment had already been processed and the funds were credited to your account (i.e. status was "Settled"), Helcim will automatically withdraw the principal amount of the transaction from your linked bank account. This will also be noted in the return email.

• $5 return fee: As per our terms of service, any ACH payment that is returned or rejected by the bank network will incur a $5 fee. This fee is charged by the banking network and passed through.

Tips for minimizing ACH payment returns

While you can't prevent all returns, these practices can help reduce them:

• Verify account details upfront: Encourage customers to double-check their bank account and routing numbers when providing them. Using Helcim's secure bank verification request can help catch errors.

• Clear authorization: Ensure you have clear, documented authorization from your customers for all ACH debits, especially for recurring payments. Helcim's tools are designed to help you obtain and store these authorizations (like PAD Agreements for Canadian customers).

• Communicate clearly: For recurring payments, inform customers about upcoming debit dates and amounts. Make it easy for them to update their bank information with you if it changes.

• Build good customer relationships: Trust and open communication can often prevent misunderstandings that might lead to disputes or stop payments.

• Monitor transactions: Keep an eye on your incoming ACH payments.

• Prudent refund policy: For refunds on sales made via ACH, consider waiting 3-5 business days after the initial ACH payment has fully settled into your account before issuing the refund. This minimizes your risk if the original payment is unexpectedly returned after you've already sent funds back.

What to do when you receive a return

1. Review the email from us: Carefully read the return notification email. Note the return code and the reason provided.

2. Check the return code details: Refer to the common US or Canadian return codes listed below for specific next steps based on the code.

3. Contact your customer (usually): In most cases, you'll need to contact your customer to resolve the issue (e.g., to obtain new bank details, discuss NSF, or clarify an authorization).

4. Update your customer’s information: If you receive new bank account information, update it in the customer's profile in your Helcim account and obtain new authorization if required (especially for Canadian PADs).

5. Avoid re-running payments for certain codes: For returns due to revoked authorization, stop payments, or disputes, do not simply try to process the payment again without resolving the underlying issue and obtaining new authorization.

Common US ACH return codes

Here are some common US return codes and recommended actions.

Common Canadian ACH (EFT/PAD) return codes

For returns on payments from Canadian bank accounts, re-obtaining authorization via a new PAD Agreement is often required before re-attempting.

Next steps

• Familiarize yourself and your team with these common return codes and the appropriate actions.

• Implement the "Tips for minimizing ACH payment risks" in your daily operations.

• Ensure you have a clear process for contacting customers when returns occur.

• If you have questions about a specific return not covered here, the Helcim Support team is ready to help!