ACH transfers are electronic payments that come directly from your checking account, moving funds automatically into the payee’s account.  Consider it check writing, for the digital age.

ACH transactions facilitate the transfer for money between banks and/or credit unions, allowing for money to be electronically withdrawn or deposited to a different bank account.  They can be from individual-to-individual, business-to-consumer, or business-to-business.

ACH transactions offer quick processing and low fees.  Transactions are completed immediately, and take only days to show in a recipient's account.  Most banks do not charge for ACH transactions, unlike credit card processing or cash transfer services like PayPal.

Debit Transactions and Credit ACH Transactions

There are two types of ACH transactions: debit and credit.  The difference is determined by which party’s bank initiates a transaction. 

ACH Debit Transactions

A debit ACH transaction occurs when the party initiating a transaction subtracts funds from their account to pay for a good or service.  For example, a recurring car payment in which the lender debits funds from the customer’s account monthly. Debit ACH transactions require the payer to provide their bank account information to the payee, or in the case of the recurring car payment, the auto dealership.  Automatic payments pull funds from the payer's account each time a bill is due, without the payer having to take any additional action outside of the initial setup.

ACH Credit Transactions

A credit ACH transaction occurs when money comes into a user’s bank account, adding to the total funds available.  The most common example of a credit ACH transfer is an employee receiving a paycheck electronically into their bank account.  This is typically called direct deposit.

What’s the Difference Between an ACH Transfer and a Wire?

Both ACH transfers and wires move funds electronically between accounts, but ACH transfers are processed in batches versus wire transfers, which are handled individually and immediately.

Batches of ACH transfers are held at an Originating Depository Financial Institution and are processed multiple times throughout the day at specific times and intervals.  After the ACH batch is processed, the requests are sent through to the recipient’s bank or credit union. Because ACH transactions are processed in batches, it can take a day or two for the funds to show in a payee’s account.  However, ACH processing is still much quicker, cost-effective, and more convenient than check writing.

Wires are processed immediately, and typically a fee is associated with each wire transaction.  Wired money typically shows in the recipient’s account within hours. 

Additionally, ACH transfers can be canceled, but wires cannot.  ACH transfers can be canceled if it was unauthorized, if it was processed at the wrong time, or if the amount is incorrect.

Perks of ACH Transactions

ACH transactions offer convenience to both the payer and payee.  For the debiting account holder, there is never a need to write a check, purchase postage, or worry about timely postal deliveries.  ACH payments are easy to track through the bank and can be automatic, meaning money is withdrawn on the pre-set date monthly.

Additionally, both ACH debit and credit transactions offer quick turnaround times.  The National Automated Clearing House Association (NACHA) dictates that ACH credits must settle within two business days.  The same authority dictates ACH debits must settle the following business day.

Most banks and credit unions don’t charge a fee for ACH transfers, so there is also a cost saving versus other payment methods.

Consider EFX for Your ACH Processing Needs

An ACH transfer is a cost-effective and convenient way to transfer funds between accounts.  If your company would benefit from ACH payments, consider EFX for your ACH processing. EFX offers fully customizable solutions designed to open new markets while increasing productivity and efficiency.