What is an ACH Payment? | A Complete Guide to ACH (2024)

FAQs

What is an ACH Payment? | A Complete Guide to ACH? ›

An ACH payment is an electronic bank-to-bank transfer facilitated by the Automated Clearing House (ACH) network. Instead of using card networks to process transactions, ACH payments utilize the ACH network to deposit money from one bank account to another.

An ACH transaction is an electronic money transfer made between banks and credit unions across a network called the Automated Clearing House (ACH). ACH is used for all kinds of money transfers, including direct deposit of paychecks and monthly debits for routine payments.

ACH Rules require you to notify your debtors of any changes in date or amount debited under the following circ*mstances: - Seven (7) calendar days notice for a change of date (consumer and corporate). - Ten (10) calendar days notice for a change in amount (consumer only).

An ACH file is a fixed-width, ASCII file, with each line exactly 94 characters in length. Each line of characters is known as a “record” and is comprised of various “fields” that are at specific positions within that line. In a properly formatted file, records must follow a specific order.

How do you send an ACH payment? To send an ACH transfer, you'll need the account information of where you want to send the money. Once you have that, you'll submit the payment through your online banking portal or PayPal.

ACH Payment Requirements:

The name of the financial institution receiving the funds (bank or credit union) The type of account at that bank (checking vs. savings) The ABA routing number of the financial institution.

Limitations. One drawback of ACH transfers is that they settle more slowly—it takes up to a few days — which could be an issue for businesses that require quick access to funds. ACH debits might not clear if the payer's account lacks sufficient funds, leading to delayed payments and potential fees.

What is the risk of paying with ACH? ›

Risk with Instant Payments

The ACH return process is one of the elements that can introduce risk into faster payments. Speeding up an ACH transaction (for example, sending a Same Day ACH transaction) doesn't speed up the return code timeline. Most common return codes still take up to two banking days to post.

ACH payments begin when the originator (payer)starts the process by requesting the transaction. The originator can be a consumer, business, or a government agency.

Which banks allow ACH transfers? All banks in the United States can use ACH, as all that's needed to receive an ACH transfer is a valid bank account and routing number.

The new rules establish a base-level of ACH payment monitoring on all parties in the ACH Network (except consumers). While the new rules do not shift the liability for ACH payments, for the first time receiving financial institutions (RDFIs) will have a defined role in monitoring the ACH payments they receive.

Reversing an ACH Entry: An Originator (Corporate Client) may reverse an entry if the entry is erroneous or a duplicate entry. Only an Originator (Corporate Client) may reverse an entry. The Originator must transmit the reversing entry within 5 banking days after the Settlement Date of the entry.

Unlike other payment methods, ACH debits can be initiated by the payee (the business) after the payor (the customer) has given the necessary authorization.