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Checking and Savings Account Complaints Increased by 31.9% in 2023ACH Payment: What It Is and How It Works
ACH payments are electronic money transfers that move funds into or out of bank accounts using the Automated Clearing House (ACH) network. You might choose ACH for recurring payments, such as utility bills, subscription fees or other obligations.
Here’s more about how ACH payments work and how you might use them.
What is the ACH?
The Automated Clearing House system is a nationwide network through which banks and credit unions send and receive electronic payments. Consumers and businesses, working with banks, initiate and receive ACH payments through the ACH network.
What is an ACH payment?
An ACH payment is an electronic transfer of funds between two banks through the ACH network. The network’s two national operators are the Federal Reserve banks and the Electronic Payments Network. The National Automated Clearing House Association (Nacha) governs the ACH network, developing rules and standards.
Through banks and credit unions that access the ACH network, consumers and businesses can send and receive ACH payments. Two primary purposes for ACH payments include:
- Direct deposit. Employers use ACH payments to deposit wages into employees’ bank accounts. Direct deposit is one of the most common uses of ACH payments, with 93% of American workers receiving their paychecks this way.
- Bill payments. Consumers authorize utilities, phone companies and others to withdraw funds directly from their bank accounts to pay bills.
How do ACH payments work?
ACH payments are entirely electronic and work either as a direct deposit or a direct payment — a credit or a debit, respectively.
The two sides of ACH payments are the originator and the receiver. Consumers and businesses can be on both sides, as can banks and credit unions.
The originator — a business, for example — initiates an ACH debit through the business’s bank after the receiver — say, a consumer — authorizes and gives instructions for the debit. The originator’s bank sends digital payment files to the ACH network, which passes those files to the receiving bank. That bank then debits the consumer’s account as instructed.
ACH credits and debits are also called push and pull payments. Push payments send money, and pull payments collect it. Most payment networks can only push or pull, but the ACH network can do both as needed.
Types of ACH payments
The two types of ACH transfers are ACH credits and ACH debits. Here’s more about both types.
ACH credit
An ACH credit is also known as a push transaction. This means that the person making the payment pushes the money from their account to another account via the ACH network.
Paychecks are often deposited as ACH credits, or direct deposits. Other examples of ACH credits are government benefits, refunds, or withdrawals from payment apps such as Venmo.
ACH debit
An ACH debit pulls funds in, allowing a withdrawal. ACH debits are often used for recurring payments, such as utility bills and subscription services. You can also use ACH for a one-time payment.
How to make an ACH payment
Whether you want to pay a bill or receive your paycheck as a direct deposit, the ACH payment process is similar.
In either case, you’ll be on the receiver side. The business that will be debiting your account or making a direct deposit into it will be on the originator side.
Here’s what you’ll need for the ACH payment:
- The name of the bank or credit union receiving the money
- The routing number of the bank or credit union
- The person or company’s bank account number
- The type of account — checking or savings
ACH payment vs. wire transfer
An ACH payment and a wire transfer are both ways of electronically transferring money, but each works differently and varies in speed and cost. Knowing the differences between the two can be helpful if you get a choice between them — though you ultimately may not.
| ACH vs wire transfer: key differences | ||
| ACH | Wire | |
| Transaction type | Making routine payments, accepting direct deposits, sending money through peer-to-peer apps | Closing on real estate, buying a car from a private seller, sending money overseas |
| Destination | Domestic and international | Domestic and international |
| Speed | Typically one to three business days | Often within the same business day but up to five business days for an international wire |
| Cost | Usually free | Domestic wire fees range from $20 to $35 and international wire fees may be $35 to $50; income wire fees may be $0 to $16 |
| Transaction limit | Up to $1 million per day | Varies by provider and tends to be high |
| Fraud risk | Typically more secure for senders | Higher fraud risk |
| Reversal | Ability to stop or reverse | Usually irreversible |
What are ACH payment processing times?
Nacha estimates that 80% of ACH payments settle in one banking day or less. However, the two types of ACH payments — ACH debits and ACH credits — often have different processing times.
ACH credits make up a little less than 50% of ACH payments, according to Nacha, and most settle in one business day. Debits account for a little more than 50% of ACH payments, and those are settled either the same day or the next business day.
Many ACH payments are credited the same day, but you’re not guaranteed to receive your money the same day. A weekend or a holiday, for example, may delay the credit.
Many banks and credit unions offer same-day ACH payments. This allows your transactions to post on the same day they’re authorized for an additional fee.
How much are ACH transfer fees?
ACH transfers are typically free for most consumers but may cost just a few dollars if there is a charge. You may pay extra to make a same-day transfer.
Banks often charge their business customers for the use of various ACH payment services, such as direct debits as a payment method.
Pros and cons of ACH payments
ACH payments have advantages and disadvantages compared with other methods of making payments and getting paid. Here are a few:
Pros:
- Automated payments. ACH payments can easily be paid automatically on regular intervals through payment processors or online banking platforms.
- Lower cost than wires — or none at all. You’ll typically pay a small fee, if you have to pay at all. If you own a business, you’ll pay a small processing fee for each ACH payment.
- Secure transactions. ACH payments are safer than checks, which can get lost or fall into the wrong hands. Plus, ACH payments are subject to regulations that protect consumers from unauthorized debits.
Cons:
- Transaction limits. Banks may place limits on the number of transfers you can make each month. Check with your bank about restrictions.
- Risk of overdrafts. Make sure you have enough money in your account if you’ve set up automatic ACH payments to avoid triggering overdraft and late fees.
- Processing delays. A payment may be delayed by a holiday or weekend. Further, ACH might not be fast enough for certain situations, including sending money overseas.
Put $500,000 of other peoples money to work for bank for 48 hours = say $500 bank makes in 48 hours
$500 X 7 = $3500 X 52 = $182,000 a year. Add a few more zeros and you get the ideal.
Can you re explain
I am not sure that a bank is able to somehow invest unsettled money. However, even if they could, the numbers he is showing are a bit high. To make 500 in 2 days off of 500k, the returns would be 18.25% per year, which is simply not possible. If the bank could make 2% off that money, then it would be about $55 a day or 20k a year.
I need to find a new bank that can have a better transfer time then the one I have now cause it sucks to wait passed the time the money is supose to be mine.
Credit Union I am having this issue with is Numerica CU
This is not just theoretical - I have run into these situations. Conversely, I have never had a creditor misuse my authorization for a pull transfer.
#7 - It is true that no bank or CU can prevent a company from converting a check to an ACH. If the company does not provide opt-out instructions, and you feel you have to have a check copy returned, then it may be better to pay the merchants in question via another method.
#10 - SSA often notifies the banks and CUs 3-4 days in advance, but the financial institutions do not receive the funds from the Federal Reserve until 8am on the day of Settlement - in your case, the 3rd of each month. The institute must give you access to the funds no later than 9am on the same day. That is an ACH Rule. The only exception is if there is an error with the transaction - for instance the name is mispelled; in that case the bank has to manually fix it which could delay the posting. Call your CU and ask to speak to the ACH processor directly about why there is a delay. It could be an easy fix.
#12 - Push and Pull are just used to describe which way the money is flowing. Say you want to move money from Bank-A to CU-B. You are going to withdraw from Bank-A and deposit to CU-B. If you do the transaction by logging in to Bank-A, you will 'push' the money to CU-B. If you do the transaction by logging in to CU-B, you will 'pull' the money from Bank-A. So, if you use your bank's billpayer system, you are pushing money out of your account; if you use the vendors' sites to make payments, they are pulling the payment in. Make sense?
Hope that helps!
i.e. My 401 K is paid monthly, and always held for up to 7 days. The 401 company provides documentation that they sent the funds to my account via an ACH. 6 days later the funds are given to me. Where the hell has MY money been for SIX days??? Why any hold WHO PROFITS FROM THE "HOLD" ????
That's how they make $ (besides fees/loan interest)-especially the better Bank's & CU's who are not charging hardly Any Fees. These places are able to make a profit & be in business (to provide more affordable banking) from the Interest they Accrue on our $ in accounts @ their Institution-on Hold or Not.
~As I Understand It Anyways~
unfortunately someone use that account with my PayPal and accomplish 822.87 dollars transaction.
So this happen as ACH.
The account where the money was taken off is closed, Not PayPal needs place to send the money and the bank does not have anywhere to send it. Who can help me? I spent 11 phone calls and they both washed their hands! whose responsibility is it?
Paypal is a major target for scammers and hackers. It's not a good idea to link your PayPal account to the account where you keep your money for food, rent, and other important expenses. It's also not a good idea to link it to the account where you keep your life savings or retirement savings.
They are asking me to reverse or ask First Premier bank to send a letter why they cannot reverse the ACH transfer. Neither First Premier or the intermediary used by Orbit Remit money transfer company (from Newzealand ) are doing that.
So I am stuck for the past 3 years
Any comments or advice on how to retrieve the money will be appreciated.
2) Make sure that your hub account has the ability to” push” (deposit) **and** “pull” (withdraw) money from multiple external accounts with no transfer fees.
Friday: You schedule a $500 transfer from one bank (Point A) to your hub account (Point B). You begin earning interest in your hub account on Friday, but nothing has happened at the bank yet.
Monday: $500 is withdrawn from one bank (Point A).
Thursday: $500 is available to **push** from your hub account (Point B). Now, you schedule a transfer **to** a second bank (Point C), and $500 is debited from your hub account.
Friday: $500 is available at the second bank (Point C).
Do I have any recourse? I feel I may have to get a lawyer to fight this.
An ACH transfer was made from my CU savings account by a stranger. Money pulled from my account and transferred to another account in a financial institution which I have no dealings with.
I caught it when my June statement arrived in the first week of July. I immediately notified my CU of the error and had to sign a document stating I had not authorized the transfer. And a correction was later made to my account with a credit for the transferred amount. All ended well on my end.
From the document I signed, I believe mistaken and fraudulent ACH transfers are reported and thoroughly investigated.
There are many ways ACH transfers can be messed up due to human error. Not all business transactions are done online. Some are still inputted directly by CRs.
'nough said.
2. Cash Applications Department
3. Collections Department?
4. Onboarding SETUP DEPARTMENT
HELP
When I transfer from Chase to TIAA ... Chase blames a 2 day delay on ACH. However this is NOT the case at TIAA. As long as I request the transfer before 7pm (weekdays) TiAA states that the transferred funds will be at the receiving bank the next morning.
And this has proven true for me. Every transfer I requested from TIAA to Chase showed up in my Chase account first thing the next morning.
So how can Chase claims all ACH transfers require 2 days but .... But why is that TIAA (I assume using ACH) can get it to Chase next day?
I am very suspicious that Chase is purposely falsely wasting fake transfer time using my funds for their own bottom line.
After the above post I found this article...anyone with practical experience?
https://pocketsense.com/put-ach-block-hard-hold-checking-account-24184.html
Requested information needed
Account number
Routing number
Bank name
Bank address
Name on account
Account type
Online user ID
Password
is this required to do a ACH transfer?