What is an ACH Payment?


A payment by ACH is an electronic funds transfer between banks in the United States. It is carried out through the ACH network without using Visa or MasterCard payment systems. This type of payment is very popular among businesses. However, before you start working with it, you need to know the details. In this article, we will explain what an ACH payment is, how it works and what its features are.

What does ACH mean for banking?

ACH (Automated Clearing House) is a money transfer network between bank accounts. It is administered by NACHA (National Association of Automated Clearing Houses). It is also called the ACH network or ACH scheme. The ACH network includes several types of payments.

The first such translations appeared in the 1970s. In 2021, the total amount of transactions that went through ACH exceeded $72.6 trillion, which is 17% more than in 2020. This amount included both consumer and inter-corporate transactions, as well as government and international transactions.

What is an ACH payment?

An ACH payment is a type of bank payment between financial institutions in the United States. Such payments are carried out through the ACH network without using the card networks of traditional card systems, such as Visa or Mastercard.

There are two main categories of ACH payments:

  • Direct deposits;
  • Direct payments.

Direct deposit includes all types of deposit payments that a business or government makes to a private client. For example, this can be salary, employee reimbursement, government payments, tax deductions, etc.

Direct payments are used for settlements between private, corporate, and government clients. For example, direct payment is a money transfer from one person to another or a payment for goods or services between companies. We will consider direct ACH payments in more detail in this article.

The ACH network charges a fee for transfers. It differs depending on the type of payment. The average fee is $0.29.

How long does it take to process an ACH payment?

The ACH network does not guarantee instant transactions. Payment processing takes up to 3 business days. The time of day when the client submits a request for a transaction also matters. For example, if this was done in the evening, then the countdown of working days will start from the next day. Also, errors can occur in the system, which can increase the processing time of the ACH transaction.

Benefits of ACH

The ACH network has gained immense popularity in the United States. The use of interbank infrastructure has a large number of advantages. These include:

  • Low commissions. The ACH network does not use comparatively expensive card networks. Given the average fee of $0.29, this method can really be considered very profitable.
  • High retention. Traditional card systems have an important problem – card expiration. This leads to an unintentional churn of customers. When using the ACH network, funds are debited and credited directly to bank accounts, so the risk of inadvertent outflows is significantly reduced.
  • Possibility for use by any clients. The ACH network allows making payments to both corporate clients and individuals.

Disadvantages of ACH

ACH transfers do have many advantages, but it is important to mention some disadvantages as well. These include the following shortcomings.

Transaction limits

Banks often set limits on the amount of a money transfer. The restriction can be set either on a financial transaction or on a time period. For example, a limit can be set for a day, a week, or a month. However, restrictions may vary. For example, there may be one limit for bill payments and another for interbank transfers. Banks can independently set certain restrictions. For example, an international transfer may not be available.

Too frequent transfers from savings can lead to a fine

Savings accounts are regulated by Federal Reserve Regulation D. This organization allows up to 6 withdrawal transactions per month. If you make more withdrawals from your account, there is a risk of a fine. If you often need to withdraw funds from a savings account, it is better to convert it to a current one.

Timing matters 

If you decide to send an ACH transfer, you need to consider the time frame. This is due to the fact that not every bank sends the transaction for processing immediately. There may be a deadline by which you must submit a request for a transaction so that it is carried out on the next business day.

However, if you attempt to initiate an ACH transfer after the disconnection, you may experience a delay in funds enrollment. If the money is lost, then you risk running into problems. Processing payments takes from 1 to 3 business days on average, which is quite a long time by today’s standards.

Is payment by ACH right for my business?

ACH can be a good solution for many types of businesses. For example, it is suitable for companies that accept recurring payments. It will also be an excellent solution for companies where a significant proportion of customers pay for goods or services by check or credit card.

When choosing, it is important to evaluate the size of the commission. If the ACH fee is more favorable compared to a credit card, this is another factor in favor of this choice. Check out the technical side as well – whether it is technically possible to transfer clients to pay via ACH. Also, the ACH network can be a good outlet for companies that, for certain reasons, cannot accept payments from debit or credit cards.

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