Getting paid is by far the #1 priority you should have regarding your camp. After all, income is the oxygen of a camp and it needs to continuously flow. I have written before on the blog that the first thing you should automate is your billing process. I will state the obvious: taking payments online will enable you to be open 24/7 for the parents of your campers to pay. In this post I am going to center on one payment method: e-Checks. What are the pros and cons of accepting eChecks as a payment method for your camp? What questions do you need to consider to know if offering e-checks as a payment option are right for your camp. If you are still on the fence about taking online payments? Maybe you should start with this post first and then come back here to learn more!
What is an eCheck?
eChecks, also sometimes referred to as ACH payments, are basically an electronic method of submitting a check for a service. e-Checks are only offered in the US and with US bank accounts since the banks in the US have been able to master the security and technological needs to pull it off. #USA!
The way it works is pretty simple: the user inputs his checking account number and routing number (those 2 sets of bold numbers on the bottom of your paper checks). The payment is made by electronic transfer from the user’s bank account to yours. Easy, simple and secure.
e-Checks are one of the many payments methods offered online today and are a great alternative for payment with credit cards. Generally they are a lot (I mean really a lot) cheaper than credit cards, since transaction fees are lower which is obviously the first pro!
What is the benefit to your camp by offering this option to parents who are registering their children?
The benefits of eChecks are pretty endless. Let’s break this down to the advantages for parents and shoppers and the advantages for you and your business.
Why your campers and shoppers will love that you offer e-Checks.
The first and most obvious advantage is just offering them more options. Like I said above, there are a number of reasons people prefer one payment method over another. It might be that they want to use their credit card on an upcoming vacation and want to make sure it has sufficient credit. It might be that they don’t want to use their credit card since they do not want to enter the card details online (there is no reason for this but there are people that still prefer not to). Or any other reason. The more options you give them to make a payment the more chance they will actually make the payment.
The law states that you need to allow one payment method that does not have a fee connected to it. Many organizations and camps we work with want to keep their price low and at the same time offer online payments. In order to do that they add a fee to credit card transactions so the cost will be offset to the parents. But I just said that you need to offer one free option, right? So what… we are back to mailing checks? No! Fees connected to e-Check processing are normally a third of credit cards. That’s why many camps offer e-Check as the free online payment option. Parents love it and your administration will love it too!
The third reason parents will be happy to use e-Checks is if they have a special account setup in the bank for children activities (either because they are super organized or because the parents are separated). Having e-Checks as an option gives them more control over expenses and allows them not to have a card connected to these expenses. Like I said, there are a lot of reason people prefer one method over another.
Why YOU will love e-Checks!
The #1 reason is undoubtedly: lower fees. The fees for processing e-Checks are sometimes a third of the cost of processing credit card. Yep, that is not a typo, a third!.
An important concept to learn regarding payment processing is “money cost”. The idea is that there is a cost associated with getting money. It comes from the loan business since there is always a cost connected to taking a loan (if you know of an option that does not cost anything let me know lol). But this is also true of any payments you get. The money cost are the fees you pay plus the time you spend on getting the money. It is a known fact that even though the price of processing payments online is higher than just taking checks, the cost is actually lower since there are less bounces and account receivables to take care of. If you are interested in this I wrote a whole post about the difference between cost and price.
Your money cost is the blended price you pay for processing plus your account receivables (people you need to run after to get money from) and your payment bounces (people that paid you and then the payment was not approved later). Lowering the price of your processing will lower your overall blended rate for processing. End result: more money in the bank for you to make your camp amazing!
Other reason you should opt to offering e-Checks are:
- The ability to offer more payment options to parents (which they appreciate!)
- Lower risk of chargebacks than with credit cards – which lowers support issues, increases completed and on time payments.
- eChecks get preferred funding, so it behooves you to offer it!
Are there any cons of offering e-Checks?
Nothing is all good, right? Especially with payment methods. There is always a reason one person prefers one payment method over another. That said, I am happy to say that the cons of e-Checks are few and far between! Nonetheless, they still exist and it is important to know them.
Not everyone can do them.
The #1 disadvantage with e-Checks is that not everyone can offer them. The technology and processing agreements around e-Checks are very complex. Until recently you needed to be a very (I mean VERY) large company in order to be able to offer e-Checks. It is something you normally could choose as an option to pay utility bills, insurance companies and state based payments (I said big, right?). The reasons for that are numerous and I will not get into it here. Let’s just take it as a fact that using e-Checks is easy, actually processing them and making it work is not.
But… (there is always a but, right?) it is 2016, and the world is changing for the better. Today, the big online registration companies and processors have found ways to be able to offer this payment method to medium and even small organizations. This is something pretty new and you should take advantage of this! It really was once an option only the big boys had. So I guess it is not that much of a disadvantage anymore. It can still be one if by chance you are [link] building a home growth system (which you should not) or if you are working with an online registration system that has not been able to secure a deal with the processors or banks that allow it (which again, you should not use them in that case for reasons that are not only connected to e-checks).
Less bounced checks!
A check is a check regardless if it is issued online or not. Unfortunately there are people that give out checks that have no cover and then they bounce. This is really annoying since it normally happens a week or two after you thought you got the funds.
Depositing checks that are not issued online are the worst possible thing you can do if you think a check might bounce. Why? When you deposit a physical check in the bank they will actually change your account balance to show a higher balance. But if it bounces, they will pull those funds back out of your account. This is obviously annoying but more important if you have issued payments to suppliers based on these funds you will have a cash flow issue now and worst yet, your checks might bounce (ouch!).
With e-Checks things are a little different. Since this is happening online, the bank is able to check that the check can actually clear before approving it. There is still a chance it will bounce since the funds might not be available when the actual transfer happens, but this is very rare. Out of the 1 million e-Check transactions Regpack has processed to date, only 0.0034% have bounced. The average on physical checks are 2.23%. I think it is pretty obvious what you should prefer for your business!
Another con is the increasing use of mobile registration and payments. It can be harder to correctly enter the information on mobile, or if parents are doing it on the fly, they may not have access to their bank account and routing information at the time of registration, in the same way they do with their credit card. A small con, but one nevertheless.
Checks take time to clear.
The last con is that it can take a day or two for the transaction to clear. The way it works with e-Checks is that once the request is issued, it goes to processing. Funds will be transferred only once the funds from the client account have been taken. Note that this is different than with physical checks as I have explained above. So it might take 2-3 business days to clear but once it has cleared and has been sent to you, the chances of it bouncing (or disputed) are very low.
With credit cards, the process is different. Once the credit card company has approved the transaction, they take the responsibility to pay you. This is one of the main reasons credit cards became successful when the technology was established. It created a safety net for businesses offering services to clients they do not know. It basically told them “if I am telling you it is OK then I will back it up with money, no matter what you will get paid!”. That was a very strong statement in the time that connectivity to computers was not everywhere. It gave peace of mind to many businesses, which is why they wanted to accept credit cards in spite of the cost.
But as I said, it is 2016 and the world has changed. Today we have connectivity to computers and financial data everywhere. All the more so when you are doing a transaction online. So today similar authentication and checking methods are implemented for e-Checks as they are with credit cards. The guarantee is not there like with a credit card BUT that is why the processing cost is lower. I personally think it is the best of both worlds: lower costs and very low risk. Win-win!
Conclusion: Is setting up e-Checks as a payment method for your camp worth it?
Despite a few cons, the answer is YES! Every payment method has cons, and e-Checks probably have the least. It is cheap for you, cheap for parents, and easy to do! Offering as many options as you can to make a payment (money = oxygen to your camp) will increase your cash flow and increase you completed payments. Options means less excuses for parents not to pay!
Plus, if you set up your payment process correctly, namely by making e-Checks the default payment, you can lower your overall money costs associated with offering online payments. This means more money in the bank for you, and less money spent on this business cost.
For me, it’s kind of a no-brainer and there are very few cases where I’d discourage including e-Checks as a payment method for your camp as part of a camp registration process.
If you are a Regpack client, ask your project manager today how to employ the best payment strategy. That includes e-Checks, autobilling and other automated processes, to boost your payments today. And if you aren’t a Regpack client (believe it or not, there are still some out there that are not…), ask your registration software or your payment processor, how e-Checks can change your cash flow and up your revenue and sales.
And learn more about integrated payments and making the most of your payment options in the following posts: