What is an ACH transaction? | Consumer Financial Protection Bureau (2024)

FAQs

What is an ACH transaction? | Consumer Financial Protection Bureau? ›

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.

Short for “Automated Clearing House,” ACH is an electronic network that handles payments between banks. If you've ever received direct deposit to your checking account from an employer, that's ACH deposit. If you've set up your utility bills to come right out of your account, that's an ACH withdrawal.

An ACH direct deposit is a type of electronic funds transfer made into a consumer's checking or savings account from their employer or a federal or state agency. The most common types of ACH direct deposits include salary payment, tax returns, and government benefits.

An ACH transfer is an electronic transfer of funds from one bank account to another over the ACH (Automated Clearing House) network. This includes everything from person-to-person transfers and bill payments to direct deposits. Common uses of ACH bank transfers include: Payroll.

Consumers may dispute a fraudulent ACH transaction within 60 days of receiving a statement from the financial institution listing the transaction or within 60 days of the settlement date. In other words, the consumer must report the fraud in a reasonable timeframe to be reimbursed by the bank.

To stop payment, you will need to notify your bank at least three business days before the next payment is scheduled to be made. Notice may be made orally or in writing. However, if the notice is made orally, the bank may require you to follow up with written notice within 14 days.

An Automated Clearing House (ACH) credit payment occurs whenever someone instructs the ACH network to “push” money from their account to someone else's. This could be an employer (often via some processing partner) pushing payroll to their employees, or a government agency pushing cash payments to eligible citizens.

Security. Another advantage ACH payments have is that they're more secure than wire transfers and card payments. This is because ACH payments must pass through clearinghouses that enforce strict regulations.

The electronic Automated Clearing House (ACH) network facilitates everything from monthly bill payments to direct deposits for paychecks. Account holders and merchants who encounter issues with ACH payments can stop or reverse them, unlike wire transfers which are usually irreversible.

Who uses ACH payments? ›

All sorts of organizations accept ACH payments, and the ACH network is widely used for all kinds of recurring payments, electronic transfers and bill payments, including: Direct deposits of paychecks into a checking or savings account. Business payments to other businesses.

The IRS doesn't count ACH transfers as cash, so they are not reported.

ACH stands for Automated Clearing House, a U.S. financial network used for electronic payments and money transfers. Also known as “direct payments,” ACH payments are a way to transfer money from one bank account to another without using paper checks, credit card networks, wire transfers, or cash.

Per the National Automated Clearing House Association (NACHA) there are only three allowable reasons to dispute an ACH Direct Debit charge as a customer: The transaction was never authorized or the authorization was revoked. The transaction was processed on a date earlier than authorized (any date after is acceptable).

How do I stop unauthorized ACH payments? You can set up an ACH debit block (typically, this is for business accounts) to prevent any electronic withdrawals from an account. If you want to allow expected ACH payments to process uninterrupted, set up positive pay, allowing only approved payments to go through.

ACH verification can be done through ACH prenote, micro-deposits, or instant account validation. The latter uses third-party apps like Trustpair to ensure protection and compliance.

An ACH fee is a charge for processing ACH debit or credit transfers. An ACH fee is less expensive than credit card processing, as the fee does not go to major credit card companies. There are a few fees associated with ACH payment processing we will discuss later on, including: Account, processing, and return fees.

Account holders and merchants who encounter issues with ACH payments can stop or reverse them, unlike wire transfers which are usually irreversible. You need to act quickly if you make an error with your ACH payment details, need to update your information or suspect fraudulent activity.

Per the National Automated Clearing House Association (NACHA) there are only three allowable reasons to dispute an ACH Direct Debit charge as a customer: The transaction was never authorized or the authorization was revoked. The transaction was processed on a date earlier than authorized (any date after is acceptable).

When can a bank take money out of your account without your permission? Contrary to what you might think, a bank could legally withdraw money from your deposit accounts (like a checking or high-yield savings account) if you've defaulted on one of its loan products, like a mortgage or car loan.