The way you pay out employee rewards has a bigger effect on speed, satisfaction, and operational costs than most HR leaders think it does. Most teams don’t see how these different pieces fit together. When businesses switch from slower ACH transfers to instant debit cards or switch back, the changes affect everything from how happy employees are to how much work your finance team has. Even Target found this out when they moved their team member recognition program to real-time payouts, and their engagement numbers went way up. Speed actually became part of the reward itself – though I know the payment terms can get pretty confusing.
ACH debits come with lower fees and easier workflows, while debit and credit options give people immediate access to their money and work in more places. The choice between these payment methods usually comes down to who your employees are and if it matters more to you to keep costs down or give people their money immediately.
Let’s look at some of the technical workflows first, and then we’ll compare how fast each one is and how simple they are to use. After that, we’ll look at what they cost and what compliance requirements you need to know about. We’ll also look at what the user experience data tells us, and then I’ll give you a choice checklist that will help you decide which option makes the most sense for your situation.
How ACH and Debit Card Payments Work
ACH payments move money in batches, while debit cards process each transaction one at a time. When you send an ACH payment for employee rewards, your money sits in a queue with thousands of other payments – in other words, your payment waits alongside everyone else’s. The bank processes these batches at set times throughout the day. This batch processing system is why ACH payments take much longer to arrive. Your employee might wait one to three business days to see their reward money show up. Debit card loads happen almost instantly because they skip the batch system completely.
Employees get frustrated when their rewards arrive late. Workers who earn performance bonuses expect to get their money fast. When payments take forever to process, it sends the message that their achievements don’t matter as much as your processing costs. Three days feels like forever when someone just hit their sales quota out of the park.
Here’s what happens when you load money onto a debit card. Your company sends the money directly to a card network like Visa or Mastercard. The network updates the card balance immediately – the whole process finishes in just a few minutes. Your employee can spend the money almost immediately.
ACH payments go through a completely different process. Your bank sends the payment instructions to the Federal Reserve or a private network – and all of these handoffs slow everything down. These networks gather payments throughout the day and then process them all together. Once the receiving bank gets the batch file, they credit the accounts based on the instructions.
Some businesses still choose ACH because it costs less per transaction. But you need to think about whether those savings are worth it for employee satisfaction. Those cost savings start to look less attractive when employees start to complain. Finance teams might save pennies per transaction. But at the same time, they might lose motivated workers in the process.
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The newer FedNow system changes this whole equation. It lets banks send ACH payments instantly instead of in batches. The problem is that most banks haven’t started working with FedNow yet for employee reward programs. In most cases, you’re still stuck with the old batch system. Most reward programs still run on payment systems that were built decades ago. Banks usually move slowly when they bring in updated systems for business customers. That means you’ll probably have to work with batch processing delays for quite a while.
Why Payment Speed Matters for Your Employees
When you reward your employees, the speed of payment probably matters more than you think. ACH payments used to take a few days to go through. But payment processing has gotten better over the years – most banks have updated their systems to process payments faster. Now, most ACH transactions go through within one or two business days. Same Day ACH has become way more common as well.
But there’s still a problem with this setup. Even with these faster ACH payments, your employees still end up waiting for their money. They can’t grab coffee with their bonus money on Saturday morning if the bank just processed it Friday afternoon. Debit and credit cards fix this problem because the funds show up in their account immediately. Your team gets their reward the second they earn it. Their weekend plans don’t have to change because they’re waiting on a payment.
This difference gets even bigger when you look at who’s on your team. The FDIC found that millions of American households don’t have regular bank accounts or don’t use banks much – and some of your people probably fall into this group. These employees might not even have the kind of bank accounts they’d need to get ACH payments. One field service company saw their team morale get much better after they switched to prepaid card bonuses. Their workers could use their rewards immediately instead of having to wait through the weekend.
So here’s what you need to ask yourself – do your team members need their money right now, or can they wait a few days for it to go through? If you have employees who live paycheck to paycheck, getting their money fast could be the difference between a reward that actually helps them and one that just creates more stress.
ACH payments come with other problems, too. Bank holidays can make you wait even longer – and there are more bank holidays than most people know about. Some employees find card activation annoying when they just want to access their bonus. The cost difference between these two payment methods might catch you off guard.
What You Pay for Fees and Compliance
If you look at the actual numbers, ACH transactions will cost you somewhere between $0.26 to $0.50 each. Compare that to debit and credit card payments that usually run around $1.50 per transaction. You can see the difference right away. That gap between the two really adds up when you’re handling hundreds or thousands of employee rewards every month.
The numbers get even more interesting when you look at how many transactions you’re doing. If your company already uses direct deposit for payroll, you’re probably asking yourself why you’d want to pay that extra card fee just for rewards. Your employees already know how ACH works, and they trust it because they get their paychecks that way. But the choice isn’t quite so simple – sometimes, that higher card fee is actually worth it because of what you get in return.
What you’re really paying for with that higher fee is the ability for your employees to get their money right away. Cards let your employees spend their rewards within minutes of receiving them, while ACH transactions can take a few days to go through. Your reward program loses some of its punch when employees have to wait three business days to get access to the money they just earned.
Cards give your employees immediate access to their rewards. They can go to any store or restaurant and use that money right away. ACH takes a lot longer to process, and that means your team has to wait for those funds to show up in their bank accounts. Now, that wait time might not be a big deal for some types of rewards. But it can really take away from the excitement of being rewarded in the first place.
With compliance and regulations, both options are going to give you plenty of paperwork to handle. Neither one is going to make your life easier in that department. ACH payments need you to follow security standards and do OFAC screening. Cards come with their own regulatory requirements. No matter which way you go, you’re going to have administrative work to do.
HR teams looking to save money usually go with ACH because those cost savings are real, and you can track them pretty easily. But you also need to consider what your employees would want. Sometimes, spending that extra money on card fees is worth it if it means more of your employees will actually use the program and feel happy about their rewards.
How to Pick the Right Payment Method
The makeup of your workforce will tell you quite a bit about which payment method makes the most sense for your company. When more than thirty percent of your employees don’t have traditional bank accounts, debit cards are usually going to be your best bet. These workers can load money onto prepaid cards and use them right away without having to worry about the bank accounts that ACH payments need.
How frequently you pay out rewards is another big factor to think about. If you’re sending rewards once a month or once every three months, the lower fees that come with ACH payments will save you money over time. But when you’re giving out instant bonuses or sending weekly recognition payments, most employees would prefer to have instant access to their money through debit cards, even if it costs a bit more.
The number of times you send payments shapes your overall costs. When you send monthly rewards, you’ll have enough payments going through ACH to make the setup worthwhile. But with weekly bonuses, each payment turns into a choice between speed and savings, and most employees will pick getting their money right away instead of waiting for bank deposits.
How much money you’re giving out matters, too. Smaller amounts under fifty dollars work great on cards because employees can spend that money immediately. That fifty-dollar threshold will change depending on what your card provider charges. When you’re giving out bigger bonuses over a few thousand dollars, it might make sense to go through the extra steps for ACH, especially since card fees based on percentages can really add up with larger amounts.
When your company has employees spread out across different areas, payment processing gets more complex. Remote workers in different states will run into different ACH processing times, while debit cards work the same way no matter where someone is. You’ll also need to check if the people who manage your company’s money have time to handle ACH file management.
Having employees in different parts of the country makes timing problems a lot worse. ACH processing relies on state banking networks and federal reserve routing systems. So, your California employees might get same-day deposits while workers in other states have to wait until the next business day.
There are some problems that businesses don’t always see coming. When you use card programs, you might need to manage more PCI compliance requirements if you don’t manage the data correctly. With ACH payments, reversals can show up days after you thought everything was finished. One of the worst things that can happen is running out of physical cards when you need them – and this always seems to happen right when you’re giving out the most rewards.
Level Up Your Incentives and Rewards
When you’re trying to choose between these payment options, you need to consider what your people need and how your business runs every day. The workflow differences between payment methods can really help or hurt your admin team, and the speed and easy access to funds directly affect employee happiness. There are also real costs that you might not see right away with cheaper options, plus user experience data shows what actually works when people use these systems in the real world. While ACH might seem like the obvious choice since it goes straight to bank accounts, the truth is that debit and credit-based systems usually work better for both administrators and employees, even when they cost more at the start.
Those hidden costs tend to add up faster than most finance teams think they will. When payments take too long to process, you end up with frustrated employees who start to wonder if their rewards will actually show up.
The way people make and receive payments keeps changing, and the system that worked great for your team two years ago might not be the right one anymore. Since this year brings new ACH regulations that should make processing faster and cut down on errors, you’ll want to take a fresh look at your reward system setup at least once a year. Your workforce changes over time, new compliance regulations come up, and technology gets better in ways that can suddenly make one option work much better than it did before.
Most places pick their payout methods once and then never think about them again. At the same time, other businesses get ahead by changing their reward delivery to match what employees want now and what new technology makes possible.
The time you spend to make this choice right will help you in ways that go beyond just the numbers in your spreadsheet. When you choose a payout method that matches what your employees actually want and need, you get to see those real smiles when rewards show up in their accounts exactly when and how they thought they would. Your team stops worrying about if their incentives will show up on time and starts thinking about how to earn more of them instead.
Speaking of which, at Level 6, we specialize in helping your business succeed through a variety of incentive programs. Maybe you want to get your sales team to perform better or make your employees happier; we have the expertise to help. Our programs include branded debit cards, employee rewards and recognition programs, and sales incentive programs made just for you – all designed to meet your exact business needs.
Reach out to us today for a free demo so we can show you how we help high-performing businesses get the most from their investment and improve their sales performance!
Claudine is the Chief Relationship Officer at Level 6. She holds a master’s degree in industrial/organizational psychology. Her experience includes working as a certified conflict mediator for the United States Postal Service, a human performance analyst for Accenture, an Academic Dean, and a College Director. She is currently an adjunct Professor of Psychology at Southern New Hampshire University. With over 20 years of experience, she joined Level 6 to guide clients seeking effective ways to change behavior and, ultimately, their bottom line.
