What is an ACH Transfer?

An Automated Clearing House (ACH) transfer is the most common method of moving money to and from bank accounts. The ACH network is involved in practically every type of electronic transaction, including online purchases, direct deposit of paychecks, mortgage payments and transfers between customers at different banks. The biggest alternative to ACH are wire transfers, which occur immediately and rely on a separate network.

Different Types of ACH Transfers

While the term may seem complicated, most bank customers rely on ACH transfers every month. There are two types of transactions processed by the ACH network: Direct Deposit and Direct Payment. Direct Deposits represent any payment from the government or a company to an individual, while Direct Payments are used by individuals and companies to transfer money to someone else.

Direct Deposit via ACHDirect Payment via ACH
  • employee paychecks
  • Social Security or pension benefits
  • Tax refunds
  • Interest payments
  • ACH Debit: recurring monthly payments from an account for bills, loans, etc.
  • ACH Credit: one-time transfer of funds to another account

For example, when you set up online bill pay or establish a recurring monthly payment on a loan, your bank authorizes an ACH debit transaction that will "pull" the specified amount from your checking account and send it to the payee. If you've ever sent money to a family member or friend at another bank, you used a service like Venmo or Chase QuickPay to "push" the money via an ACH credit transaction. Note that while the ACH network is used by banks to cover online transfer requests, the system itself is not connected to the Internet.

Transferring and Receiving Funds With ACH

If you use a bank account to send and receive funds electronically, you probably use the ACH on a regular basis already. As a bank customer, you'll rarely see the bank referring to your transfer options as ACH transactions, but that doesn't change the fact that the ACH network will be involved. Since ACH transfers are almost always free of charge, there's little need to worry about which of your bank transactions are handled through ACH. Besides person-to-person payment apps, bank customers have several options that involve ACH transfers.

These days, most banks have a full range of online banking services available through their websites, so making an electronic transfer doesn't require more than a few minutes at the computer. If you're looking to set up an automatic payment or make a purchase with an online merchant, you can also visit the website of the company you intend to pay. Any time you use your debit card number to check out on Amazon or pay your rent, you are authorizing an ACH transfer from the checking account connected to that card. Note that credit cards are not part of the ACH network, and process using a different system.

How Long Do ACH Transfers Take?

One major factor you should consider is the speed of transfer. ACH credit transfers usually take one to two business days to process, while ACH debits process within one business day. This ensures that ACH debits —which are often time-sensitive payments on bills, loans or subscriptions —always arrive in a timely fashion. ACH credit transfers, on the other hand, can experience slightly longer delays. This usually depends on the time of week you choose to request the ACH credit transfer.

ACH transfers are handled by banks, which means that the network is only active during business days. If you happen to make an important transfer on a Friday or during the weekend, you may not see the transaction reflected in your account balance until the following week. You can pay extra to rush an ACH transfer with same-day payment, which are settled in two batches each day. Same-day ACH transfers filed by 10:30 AM EST are settled at 1 PM, while same-day transfers filed by 2:45 PM EST are settled at 5 PM.

ACH transactions over $25,000 and international ACH transactions aren't eligible for same-day processing. Ideally, you should try to avoid getting caught by unnecessary account fees. The simplest way to prevent delays with ACH is to schedule automatic payments for your recurring expenses. By selecting a date well before your bill or payment comes due, you'll ensure that the ACH network always has enough time to get your funds transferred to the right place.

Wire Transfers vs. ACH Transfers

If you find yourself pressed for time, you might need to look at alternatives to the ACH network. Wire transfers, which are the most common non-ACH transaction, process much more quickly than ACH transfers, making them the method of choice for urgent business. However, wires also cost significantly more in fees; banks charge both the sender and the recipient of a wire, making them far more costly than the standard ACH transfer. You can expect a wire transfer to cost $10 to $15 for the recipient and up to $50 for the sender.

Wire transfers are also a better means of sending money internationally. Because the ACH network is based in the US, you'll often find that banks overseas are not participants, making it impossible to send money to them through ACH transfers. This leaves wire transfers as the only viable option for international transactions at regular banks, which can be painful for people who dislike paying higher fees. While a number of online exchange services like TransferWise and PayPal enable you to send money internationally at lower prices, these methods often rely on ACH transfers. Despite their cost, wire transfers are still the fastest and most reliable way to move funds to another country.

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