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Accepting ACH Payments is a win-win situation. It is certainly more convenient than paper checks and the hassle that can create when you need to collect on bounced payments. On behalf of your clients, it facilitates convenient payments. For merchants like yourself, your business can generate more revenue affordably. When adding ACH to your payment options, it is essential to familiarize yourself with ACH return codes. An ACH transaction can be returned due to many factors. Irrespective of the cause, these returns can lead to revenue loss and an increase in fees owed to your payment processor.
Although some returns can’t be avoided, most of them can be easily prevented or reduced. To help you understand the language of ACH, Payment Savvy offers this go-to guide on the most readily seen ACH return codes.
Most Common ACH Return Codes
- R01: Insufficient Funds – Customer does not have enough available funds to cover an ACH payment transaction
- R08: Payment Stopped – ACH receiver requested a stop payment order on an ACH entry
- R09: Uncollected Funds – Sufficient funds are available in the account, but the account holder’s deposit has not cleared
- R16: Account Frozen – Due to legal issues or an action by the RDFI, a bank account is frozen and not available to debit
- R20: Non-Transaction Account – ACH transaction attempted cannot be processed on a customer’s bank account
Administrative ACH Declines
- R02: Account Closed – Bank account debited is closed due to the actions of your customer or the Receiving Depository Financial Institution (RDFI)
- R03: Unable to Locate Account – ACH payment information provided doesn’t match your client’s name, or the account number does not exist
- R04: Invalid Account Number – Checking account number submitted for processing is not correct
To lower the number of administrative ACH returns, it is advisable to use dual account entry. This ensures that clients accurately verify banking information to prevent processing errors.
Unauthorized Debit Entry ACH Return Codes
The codes discussed below indicates your payment attempt is, in essence, ‘blocked.’ This particular set of returns traditionally is associated with a higher merchant fee. Higher fees are bad for business; let’s breakdown these pertinent codes so you can develop business protocols to avoid them.
- R05: Unauthorized Debit to Consumer’s Account – A debit was attempted on a consumer’s account, but the consumer indicates the payment was not authorized
- R07: Authorization Revoked – Customer revoked your business’ authorization to debit the bank account for future payments.
- R10: Customer Advises Unauthorized Transaction – Customer advises their financial institution to not pay an ACH transaction due to it not being recognized or authorized
- R29: Corporate Not Authorized – A non-consumer receiver notifies the RFDI an ACH transaction has not been authorized
Miscellaneous ACH Declines
- R13: Invalid ACH Routing Number – The entry contains an invalid ACH routing number
- R18: Improper Effective Entry Date – ACH entry was presented before the first available processing window for an effective date
- R23: Credit Entry Refused by Receiver – The exact and correct dollar amount was not given to the bank for processing
- R26: Mandatory Field Error – Debit attempt to a bank account is refused due to missing mandatory processing fields.
- R28: Routing Number Check Digit Error – Invalid routing number entered
Handling ACH Returns
ACH returns can be costly; fortunately, establishing a plan for handling and avoiding ACH return codes is easier than most merchants anticipate. The simplest way to prevent returns is KYC – Know Your Customer. Ensure you have current and correct contact information for your clients. Also, make sure it’s easy for customers to reach you. If it simple to chat, they will most likely discuss your business’s issue first over revoking authorization with their bank. Similarly, reaching out to a customer when a simple return is received, such as an invalid routing number, can quickly correct an unintended error.
Having payment authorization on file for every ACH payment processed is a must-have. Whether in electronic or hard copy format, this simple document is paramount to provide in case required to prove your business has permission to debit a bank account. Also, get in the habit of verifying bank account information to avoid the transposing of digits or simple human errors. Make sure the customer is aware of the ACH process date and debit total. In the case of recurring payments, we recommend providing all future payment date attempts and dollar amounts.
We hope this guide provides insight into the ACH return reason process. Want to discuss your payment strategies or expand your current payment solutions? Reach out to Payment Savvy today. Since 2010, we have provided innovative options to our clients.
We look forward to building a custom payment arsenal for your business!
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