An ACH payment is an electronic fund transfer made between banks and credit unions across the Automated Clearing House (ACH) network. It is a computer-based electronic network for processing transactions, usually domestic low-value payments, between participating financial institutions. ACH payments can be used for all kinds of fund transfer transactions, including direct deposit of paychecks and monthly debits for routine payments. Merchants often enable consumers to pay bills via ACH by providing an account number and bank routing number. There are two main categories of ACH transactions: direct deposits and direct payments. Direct deposits are used for payments from businesses or the government to a consumer, particularly for payroll, as well as government benefits, tax refunds, interest payments, and more. Direct payments are initiated by the payee with pre-authorization from the payer and include consumer payments such as utility bills, insurance premiums, mortgage loans, and other types of bills.
ACH payments are processed in batches and are designed to process numerous transactions with low fees to encourage their use for low-value payments. While many ACH payments clear quickly, transactions can sometimes take several days to complete due to the way in which an ACH is processed and precautions against fraud and money laundering. ACH payments contrast with real-time gross settlement (RTGS) payments, which are processed immediately by the central RTGS system and not subject to any waiting period on a one-to-one basis.
The ACH network is a US-based network that also covers the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands. It is the primary system that agencies use for electronic funds transfer (EFT) . The ACH Network processes two kinds of ACH transactions: Direct deposits and direct payments. The modern ACH Network has been continually advancing since its inception, adding new capabilities and transaction types, improving processing speeds, and expanding operating hours. Same Day ACH went live in 2016 and has grown in popularity as innovation continues.
