What Is ACH?

ACH stands for Automated Clearing House (ACH). It is governed by NACHA which issues rules and standards. If you can’t comply with Nacha, you can’t be part of the ACH network.

What Is ACH Used For?

ACH is a way to make payments to bank accounts regardless of which banks are involved. Many companies use ACH to deposit employee paychecks on a regular basis. Most people know this as direct deposit. Direct deposit, whether recurring, or one-time takes place via the ACH network.

Consumers also use ACH to automatically pay bills or payments. In this case, the ACH takes money from the person’s account and deposits it in the company’s account. Although the viewpoint has changed, this is the same form of transaction. Using ACH this way is often known as automatic payment.

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ACH – FinanceGourmet.com

Can ACH Be Used for One-Time Payments

ACH can be used for one-time transactions. Many of these transactions originate on the internet. These transactions are referred to as WEB entries. Consumers may log in to financial institutions or bank accounts and make one-time payments or transfers. Examples include, paying some or all of the balance of a credit card account, making a mortgage payment manually, or even buying games on your iPhone.

Sometimes people transfer money with ACH just to move money between accounts. Many high-interest rate online banks have no physical presence, that makes ACH very important to their customers.

Can ACH Transactions Be Reversed

The answer is yes, but with a very big BUT. The financial institutions involved must be willing to go through the process of reversing an ACH transaction. That is much more likely to occur if the ACH transaction was very recent, days at most, or as little as hours. Many larger financial institutions will allow customers to cancel ACH transactions on the same day because they don’t actually process the transactions as they come in. Instead, they batch them and run them all at night, so you aren’t really cancelling your ACH transaction so much as you are never initiating ACH transfers at all.

Is ACH Transfer a Credit Card, Visa, or Mastercard Transaction

The ACH network works independently of the Visa and MasterCard networks. ACH transfers are much cheaper than credit card transfers that require the payment of fees to access their networks. This is why many retailers prefer ACH transactions to credit card transactions and will incentivize their customers to use ACH instead.

For example, Target offers a Target Redcard Debit Card. Unlike when the customer uses a credit card, using the debit card eliminates the high fees charged by Mastercard and Visa. Instead, with each transaction the customer enters a PIN number, and the money is withdrawn from the linked checking account using ACH. In exchange, Target offers a 5% discount on all Target Debit Card transactions.

How Long Does ACH Take?

An ACH transaction requires a handful of steps. The issuing bank will verify that its customer has enough money in the account to make the transaction. The receiving bank will then receive the funds. This process can take up to 48 hours.

The catch to ACH is that many companies only process their ACH transactions in batches at certain times of day. So, even if you request an ACH transaction on Monday, if your request came in after the last batch of transactions are processed, your bank won’t even try to start the process until Tuesday, so you would count 48 hours from then, which puts you on Thursday, assuming the receiving bank hasn’t already processed its incoming ACH transactions. If not, then that is Friday. Of course, most banks and financial institutions won’t transfer ACH monies on the weekend, or banking holidays. This is why banks often warn customers that an ACH transaction can take 5 to 7 business days.

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How To Get Same Day ACH Transactions

In the last few years, ACH has updated its network so that some institutions are able to offer same day ACH. If the receiving bank gives access same day to the funds is a different matter. The good news is that even though the bank may not be willing to release the funds right away, the transaction still counts as happening on that day. That means your credit card payment or mortgage payment won’t be late.

Typically to use same day ACH the transaction has to be initiated prior to a cutoff time. After that, the bank or brokerage will already have started the same day batch of ACH transactions and everything else will have to wait for tomorrow.

ACH vs Wire Transfer

Which is better Wire Transfer or ACH? It is not that ACH is better than Wire Transfer, or vice versa, so much as their different structure makes it easier to choose which one is right for you.

  • ACH is usually free.
  • Wire transfers cost money
  • ACH takes 1-5 Business Days
  • Wire transfers are almost instant
  • ACH only works in the U.S.
  • Wire transfers can be sent to anywhere there is an operator to receive the funds.
  • ACH may be able to cancel or dispute the transfer
  • Wire transfers cannot be cancelled and once the money is gone; it’s gone without a trace.

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