ACH Payments: Everything You Need to
Know About These Transactions

There are payment processing providers who offer ACH payments as a service for merchant accounts. Automated Clearing House (ACH) payments are a famous payment method for businesses to provide their customers due to predictable processing timelines and low per-transaction costs. Most business owners have not put many thoughts into this payment method, but this can be really beneficial. If you want to know more about ACH payments, continue reading the post.

What Are ACH Payments?

An ACH payment is an automatic and electronic payment transfer between banks through the ACH network (Automated Clearing House). As per the NACHA (National Automated Clearing House Association), the ACH network is a system that financial institutions and banks use to aggregate Automated Clearing House payments for processing, which usually happens 3 times every business day. Overall, ACH transfers are similar to using Venmo and PayPal to transfer money, but with unique processes and regulations. Besides, there are two types of ACH payments, such as direct payments and direct deposits.

ACH Direct Deposits

ACH direct deposits are electronic payments processed from a government and business entity to a customer. Transfers that come under this category are:

  • Paychecks
  • Government Benefits
  • Interest Payments
  • Tax Refunds
  • Employer-Reimbursed Expenses
  • Annuity Payments and more

ACH Direct Payments

ACH Direct payments are used by businesses, organizations, and individuals to send money. For instance, if you pay your bill online directly from your account, it is an ACH direct payment. Apps like Zelle and Venmo also use ACH to transfer money.

In short, ACH direct deposits means you are receiving money. On the other hand, an ACH direct payment means you are transferring the money to someone else.

Are ACH Payments Safe?

The simple answer is, Yes. The NACHA and federal governments regulate the ACH network to add security to the payments. They strictly enforce several operating rules and guidelines, which protect businesses and their customers’ confidential information. Moreover, to ensure safe and secure ACH transactions, choose your payment processing provider carefully. It is recommended to pick a provider that fully complies with the regulations defined by NACHA.

Processing Time of ACH Payments

ACH transactions can get processed at the time of business hours. It happens at 3 points across the day. This payment method is entirely different from wire transfers (which process in real-time). Remember that the amount you send through ACH payments may take a couple of business days to credit into the targeted bank account.

But, the good news is that the National Automated Clearing House Association introduced new rules. Under these regulations, most merchant services will be allowed for the same-day fund processing. However, the availability of this accelerated ACH transaction depends on the payment processing provider or bank. It may come with some fees as well.

How Does ACH Payment Work?

An ACH payment can process in seven steps, such as:

  • In the first step, the originator initiates the ACH payment. Here, the originator can be an individual, business, or bank.
  • Now, the originator’s bank will process the ACH entry.
  • Bank will send ACH entries to ACH operators in sequence. Every bank has a predefined timetable to send these batches.
  • The ACH operators sort the entries into payments and deposits.
  • Then, the ACH operator forwards the ACH entries to the bank of the recipient.
  • The receiving bank confirms whether the originator’s bank account has enough amount to allow the requested transaction or not.
  • The receiving bank then either credits or debits the account based on a deposit or payment.

Being a business owner, you can expand your payment processing option to add ACH payments. This will provide convenience to your clients and let you enjoy the benefits of payments via the regulated ACH network. Every year trillions of payments are processed through the ACH network, displaying its reliability.

Benefits of ACH Payments

Using ACH payments to make person-to-person transactions or to pay your bills offers multiple benefits. Some of them include:

  • Highly Convenient

Paying your utility bills, mortgage, and other recurring expenses using ACH payments is time-saving and easier than other methods. You can also save some bucks by not having to pay for stamps. Also, ACH payments can be more secure and safe than other payment forms.

  • Quick

Receiving or sending ACH payments is quick. As per NACHA, the fund transfer via the ACH network usually occurs the next day of transaction processing. The operating rules of NACHA state that the ACH debits process the next business day and the ACH credits process in 1 or 2 business days.

  • Cost-Effective¬†

Another advantage of ACH transfers is that they are cost-effective options. ACH payments are often free – it depends on the type of transfer and bank involved. For instance, your bank can charge you nothing to transfer your funds from a checking account to another account in a different bank. If the bank does charge you, it will be a nominal fee of a few dollars.

  • Easy to Handle

ACH transfers are beneficial for businesses as they are easy to handle. When consumers pay their bills by checks, being a business owner, you need to wait for the mail to arrive, and then you can deposit those checks with a bank. Whereas ACH payments are reliable and quick, businesses do not require to forward any bank statements to receive your funds.

Closing Words

ACH payments are a relatively hassle-free method to send or receive money. Hopefully, now you know everything you should know about ACH payments as a business, organization, or individual. Above all, make sure you understand your bank’s policies for ACH payments, including ACH direct deposits and ACH direct payments. If you’re one of those businesses that don’t use ACH payments, consider incorporating them into your business process as soon as possible. You may also seek a professional’s help for more details on ACH payments before investing in them.



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