ACH Payments: What They Are and How They Work

ACH (Automated Clearing House) payments are electronic funds transfers that allow individuals, businesses, and organizations to send and receive money securely and efficiently. ACH payments are commonly used for direct deposit, bill payments, and other transactions where funds need to be transferred from one bank account to another.

Here’s how ACH payments work:

  1. The process starts when the person or organization that initiates the transaction (known as the originator) submits the payment instruction to their bank or financial institution.

  2. The bank or financial institution sends the payment instruction to the ACH network, which is a secure electronic system that processes ACH payments.

  3. The ACH network processes the payment instruction and sends it to the recipient’s bank or financial institution.

  4. The recipient’s bank or financial institution deposits the funds into the recipient’s account.

The entire process typically takes between one to three business days to complete, depending on the time of day the transaction is initiated and whether or not it falls on a weekend or holiday.

ACH payments can be initiated through a variety of channels, including online banking, mobile apps, and point-of-sale systems. They are a popular payment method because they are fast, secure, and cost-effective. In fact, ACH payments are often less expensive than other payment methods such as wire transfers or paper checks.