In the event that you have sent or received money electronically before, chances are that an Automated Clearing House (ACH) fund transfer was involved.
The name may be foreign to you, but these ACH payment processors make up for most of the online bill payments you conduct and the direct deposits you receive, along with other transfers made. What follows is a breakdown on how they work.
What is ACH transfer
One of the biggest U.S. payment systems is the Automated clearing House network. An ACH transfer refers to any electronic transfer of money between different financial institutions that goes through this network. The various types of payments include person-to-person transfers, bill transfers, payroll deposits and direct deposits from employers. With regards to sending money to friends and family, many providers who facilitate these transfers use the ACH network. The ACH network must run with the proper safeguarding practices to make sure any and all data is secure when used, this is where NACHA compliance (https://www.tokenex.com/solutions/nacha-compliance) comes in as a regulator to make this possible.
Types of ACH transfers
ACH transfer gets processed in one of two ways; the selected means vary in cost and delivery speed. The ACH debit transactions method involves money getting “pulled” out of an account. For example, when an individual sets up a recurring payment for a bill, the company you are paying can pull what it’s owed from your account each month. ACH credit transactions also allow you to “push” money online to accounts at various banking institutions.
It is Faster
The delivery of ACH transfer can be completed as quickly as two or three business days. The speed is in direct relation to ACH network operators processing transfers in batches at a specific time each day. ACH debit transactions are usually processed on the following business day and ACH credits are processed within one or two business days. However, banks may levy a holding period, causing the total delivery time to vary.
Lower Costs
ACH debit transfers are usually small amounts; this includes payroll deposits and most bill payments. For ACH credit transfers, banks might charge a small fee for sending money between different institutions. Banks call this act an external funds transfer.
ACH Transfers vs. Traditional
Different to ACH transfers, traditional bank wire transfers done within the U.S. tend to involve a large fee on the frontend, and an additional fee to receive the funds. Due to the speed and cost, many organisations tend to use ACH transfers for both U.S. and abroad.
ACH transfers can be a cost effective way to move money at both the business and individual level. It is suggested that you research about the policies, flow and other related costs before making the switch, as this will help you avoid any unplanned processing delays, potential limits so that you can benefit most from this service.
Visit www.ach-pay.com to learn more about how ACH transfers can benefit you.
