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What is the difference between ACH and Credit Card Authorization?

ACH - Provides payment through an individual's checking or savings bank account

Credit Card - Provides payment through an individual's credit card

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Last Update May 15th, 2024


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What is a Recurring ACH Payment

A recurring Automated Clearing House (ACH) payment is a transaction where an individual, business owner, or company is paid directly from a buyer or user’s bank account for a purchase or ongoing service.

This is facilitated by the customer signing an ACH Authorization form to acknowledge and give consent to a future direct payment from their bank account.

This works as a form of legal contract between the 2 parties, as it shows permission has been given for the transaction via the account holder’s signature and provision of banking details.

When, How and Why to Use an ACH Authorization Form

An ACH authorization form is essential when collecting payment directly from a customer’s bank account. This is especially important if more than one payment is to occur.

It allows businesses to safely and securely obtain the consent of their customers to deduct money from their bank account for services rendered.

Ultimately, this authorization makes the payment process much more reliable for both parties.

For the business, it makes a potential chargeback claim or authorization hold less likely.

For the customer it allows them to know when payments will be taken to help them distinguish between the genuine transaction and fraudulent activity.

These documents differ slightly from credit card authorization forms. This is because ACH forms make a direct charge to an individual’s personal bank account instead of charging a credit card for the amount owed.

Terms to Include in an ACH Authorization

When using an ACH Authorization template, you will notice a number of key details.

These are included to make sure that you get exactly the information needed from the customer to successfully help the transaction go through.

You can usually find most of the following details on a draft ACH authorization:

  • Name of the company collecting payment
  • Personal data of the client being charged
  • A statement acknowledging the permissions given
  • Amount to be taken
  • Banking details for the account that will be charged
  • Date of the deduction and frequency of payments
  • Description of the goods or services provided to the customer

The document must also be signed and dated by the owner of the bank account in order to show they consent to the transaction(s).

How to Fill Out an ACH Authorization Form

Filling out this form is a relatively simple process. You can use our ACH Authorization Form template, then task a lawyer to review the document to make certain everything is correct.

After the form is ready, it can either be given to the client with some or all the necessary information prefilled, such as the payment amount or your company’s name.

Alternatively, the form can be provided as a standard template with blank spaces the customer can fill in themselves.

When filling the form, all you or the client need to do is follow the steps below:

  1. Download and print the template
  2. Indicate how frequent the payments should be
  3. Provide the personal details requested by the form
  4. Complete any information detailing the charges that are to be made
  5. Enter billing information needed to process payment
  6. Sign and date the form

Both you and the payee should keep a copy of the completed ACH form for your records. This will help resolve any issues if disputes arise.

Types of ACH Authorization Templates

There are two main types of ACH authorization templates. These allow for either one-time purchases to be carried out or for multiple recurring payments to be taken.

Let’s look at these in a bit more detail in the following sections.

1-time ACH Authorization

As you might expect, a 1-time ACH authorization allows a single deduction of an agreed amount to be taken from an individual’s bank account.

This allows a payment to be confirmed at the time of purchase, with the money taken in a later transaction on a specified date.

Recurring ACH Authorization

This allows money to be taken on either a weekly or monthly basis. This will most commonly be used by subscription-based businesses such as gyms or to make regular payments to someone, such as to pay your monthly rent.

Sample ACH Authorization Form

If using a standardized form, it can be helpful to look at an example template first.

Use our sample ACH authorization form below to get a clearer picture of what your document should look like.

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ACH Authorization Sample

FAQs About ACH Authorizations

There are many details to consider when you use an ACH authorization form. To get more familiar with the key features of these legal documents browse our FAQs below for more information.

Do I Need an ACH Authorization Form?

It is necessary to use an ACH Authorization Form if you want to collect payment directly from a customer’s bank account.

This allows the client to give clear consent for the payment, so their bank doesn’t block the transaction.

How Long Is an ACH Authorization Good For?

Generally, an ACH authorization form is valid for up to 2 years.

During this amount of time, the ACH document should be kept by both parties even if the payment is canceled as a record of the consent given at the time of the transaction.

How Can I Get an ACH Authorization Form?

You can create your own ACH authorization form using our pre-prepared template. This allows you to download and complete the form as necessary before it is signed.

You can then ask a legal professional to review your document to help **guarantee it meets any requirements **based on your circumstances.

How Can I Receive an ACH Payment?

To receive an ACH payment you first need the payee to complete an ACH authorization.

This document informs your bank that you have permission to deduct money from the individual’s account directly.

Once the form has been completed, you can then carry out the transaction using your payment processing software as normal.

The payment should only be taken on the agreed-upon date (or dates if the payment is a recurring one).

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ACH Authorization Sample

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Preview of your ACH Payment Authorization

ACH Payment Authorization
☐ Recurring charge: you authorize scheduled periodic charges to your Bank Account.
In each billing period, you will be charged the amount indicated below. You will be provided with a receipt for each payment and the charge will appear on your Credit Card or Bank Account Statement. In the event the billing date or the amount charged changes, you agree that notice of such change will be provided to you by us at least 10 days before the payment due date.
I, _________, allow _________ to charge my Bank Account below for $_________ as of _________, _________.
Goods/Services Provided: _________
☐ One (1) Time Charge - Please sign and complete this form to authorize a one-time charge to the merchant below to your Bank Account listed below.

By doing so, you permit us to withdraw the indicated amount from your account on or after the indicated date. This is a permission for a single transaction and in no case does it authorize any other operation related to your account.
I, _________, allow _________ to charge my Bank Account below for $_________ on _________.
Goods/Services Provided: _________
Billing Details
Billing Address: _________
Phone Number: _________
Email: _________
Bank (ACH) Information
☐ Checking Account / ☐ Savings Account
Account Owner: _________________________
Bank Name: _________________________
Account Number: _________________________
Routing Number: _________________________
I understand that this authorization will remain in effect until I cancel it in writing, and I agree to notify the merchant in writing of any changes in my account information or termination of this authorization at least 15 days prior to the next billing date. If the above noted payment dates fall on a weekend or holiday, I understand that the payments may be executed on the next business day. For ACH debits to my checking/savings account, I understand that because these are electronic transactions, these funds may be withdrawn from my account as soon as the above noted periodic transaction dates. In the case of an ACH Transaction being rejected for Non-Sufficient Funds (NSF) I understand that the merchant may, at its discretion, attempt to process the charge again within 30 days. And agree to an additional $11,111.00 charge for each attempt returned NSF which will be initiated as a separate transaction to my account must comply with the provisions of U.S. law. I certify that I am an authorized user of this credit card/bank account and will not dispute these scheduled transactions with my bank; so long as the transactions correspond to the terms indicated in this authorization form.
Signature: _________________________     Date: _________________
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What is the difference between ACH and Credit Card Authorization?

ACH - Provides payment through an individual's checking or savings bank account

Credit Card - Provides payment through an individual's credit card