How do I make an ACH payment? How long does an ACH transfer take?
Have you signed up for automatic bill payments, received a tax refund directly to your account, or sent money between banks without going to a branch? If so, then you've already enjoyed the convenience of ACH payments.
ACH payment, meaning Automated Clearing House, makes things easier for individuals and businesses by simplifying repetitive tasks like payroll processing, paying bills, and streamlining bank transfers . As the reliance on digital banking grows, ACH will continue to adapt to provide a secure and reliable route for the quick movement of money from one point to another.
In this guide, we will discuss the role of ACH payments in the modern financial system. We will also discuss ACH payment processing time and the benefits of why it is a fundamental component of modern banking.
What is an ACH payment?
ACH payment is the process of transferring money directly from one account to another in a different bank without the hassle of paper checks or in-person visits. It is a secure and efficient way to handle transactions. More people are relying on ACH transfers to receive paychecks via direct deposit, online bill payments, scheduled deposits for savings or investments, and more. As per statistics, around 94% of Americans1 receive their pay through the ACH network.
Besides cost-effectiveness, what sets ACH apart from other payment methods is its strong focus on security. Payments are processed in batches, reducing costs while maintaining efficiency. Additionally, the system includes robust fraud detection measures that offer security to its users.
The National Automated Clearinghouse Association (Nacha), which manages the ACH payments, reported the total number of ACH payments made in 2023’s third quarter to reach 7.8 billion2, which was a 3% increase compared to the previous year. This growth isn’t surprising when you consider how seamlessly the system simplifies our financial management requirements, offering a reliable and affordable way to move money efficiently and securely.
How to make an ACH payment?
Making an ACH payment is a simple and secure way to transfer funds between accounts. Whether you're paying bills, making a purchase, or sending money to someone, here are steps on how to send an ACH payment efficiently and confidently.
Step 1: Verify eligibility
Before initiating an ACH payment, ensure your bank account is eligible for ACH transfers. Most banks offer ACH services, but it's always better to confirm with your bank. You need to link your account to the ACH network if it's not already set up.
Step 2: Choose between ACH debit and ACH credit
When setting up an ACH transfer, you must decide whether to use ACH credit or ACH debit. ACH credit is commonly used for bill payments, where you authorize your bank to send the payment to a payee, like a utility company or lender. In this case, your account details remain secure with your financial institution.
Step 3: Execute the ACH transfer
Before you complete the transfer, there are a few ACH instructions you need to follow. Depending on your bank, you may need to fill out paperwork, often electronically, though some financial institutions still use hard-copy forms.
To complete the transfer, you'll need to link your bank account to the ACH network. Provide the necessary information to your financial institution, including the recipient's details and payment information.
Make sure to input the correct payment amount to ensure the right funds are transferred. Most banks allow you to schedule payments for a future date. Choose a specific date or set up recurring payments for convenience.
Step 4: Access your online banking portal
Log into your online banking portal or mobile banking application. Navigate to the "Transfers" or "Payments" section, where you'll find ACH payments as a transfer option.
Step 5: Initiate the transfer
Choose ACH payment as your transfer method, and enter the recipient's bank account information and payment amount. For recurring payments, you can set up automatic transfers for future payments.
Step 6: Review and confirm
Before submitting the transfer, review all the details to ensure everything is accurate. Confirm the payment information to avoid any delays.
Step 7: Process the payment
Once confirmed, the ACH payment will be processed. ACH transfers typically take one to three business days, depending on the banks involved and the type of payment.
How long does an ACH transfer take?
When it comes to ACH transfers, one of the most common questions is, "How long do ACH transfers take?" Most ACH transfers are completed within 1 to 3 business days. The processing time varies based on when the payment is initiated and whether it falls within the ACH network's operating windows. Transfers that are processed outside of these windows could take longer, extending the time it takes for funds to move between accounts. While it's common for ACH payments to take a few days, the network now includes additional windows to facilitate faster transactions.
Factors influencing processing time
Here are some of the factors that can influence the time it takes for an ACH transfer to process:
There's a difference between ACH credits (pushing money in) and ACH debits (pulling money out). Debits generally process faster than credits, meaning that if you're withdrawing funds, it may go through more quickly than if you're depositing money.
ACH transactions are processed only on business days, so weekends and holidays will delay transfers. Payments initiated on these days will not be processed until the next business day.
Each financial institution has its own internal processing timeline, affecting how quickly an ACH transfer is completed. If you're transferring money between different banks, the receiving bank's policies might add additional delays.
Recurring ACH payments typically process faster since they are scheduled in advance. In contrast, one-time payments may take longer, especially if they require additional verification or security checks.
Errors, such as incorrect account information or insufficient funds, can result in payment returns, which extend processing time. To avoid delays, it's important to double-check details like account and routing numbers before initiating a transfer.
Same-day ACH transfers
For individuals looking for a faster way to make their transfers, same-day ACH transfer can be useful. Unlike a regular ACH transfer, which can take up 2-3 business days to reflect in the receiver’s account, same-day ACH transfers ensure that funds are deposited within the same business day.
Keep in mind, not all banks and financial institutions offer same-ACH transfers and additional fees are applied.
What information is needed for ACH payment?
When initiating an ACH transfer, it's important to provide accurate information to ensure a smooth and timely transaction. This system, designed for secure electronic transfers, relies on specific details to move money between bank accounts. The required information for an ACH transfer typically includes:
- Account Number: This is the unique number assigned to your bank account.
- Routing Number: This nine-digit number identifies the financial institution where your account is held.
- Recipient's Name and Address: If you're sending money to someone else, you will need their full name and address, depending on your bank's requirements.
- Transaction Amount: You'll need to specify the amount of money to transfer.
- Transfer Type: Specify whether the transfer is a one-time payment or a recurring deposit. You may also need to set the frequency (e.g., weekly or monthly) for recurring payments.
- Bank Account Type: Be sure to indicate whether the account used is checking or savings.
Each of these details ensures that the ACH transfer is processed quickly and without errors. If any information is incorrect, it could lead to delays or even a failed transfer. For example, an incorrect routing number could result in the payment being sent to the wrong bank, or an incorrect account number might cause the funds to be lost or misdirected.
Common uses
ACH payments have become a trusted mode for handling financial transactions. Their versatility and convenience make them popular for personal and business transactions. Some of their use cases include:
Payroll direct deposits
One of the most recognized uses of ACH payments is payroll direct deposits. Employers use the ACH network to send employees’ paychecks directly to their bank accounts at a set time every month. This means that by automating this process, you eliminate the need for physical checks, and employees get their salaries on time. This process is not only faster but also reduces administrative overhead for businesses.
Recurring bill payments
ACH payments are also widely used for recurring expenses like utility bills, mortgage payments, and subscription services. By automating these payments, individuals and businesses can avoid missed deadlines and late fees, making financial management simpler.
Business-to-business transactions
In the corporate world, ACH transfers streamline business-to-business payments. Companies can pay suppliers, vendors, or partners efficiently, avoiding the delays and costs associated with paper checks or wire transfers.
Personal money transfers
ACH makes transferring money between personal accounts easy and cost-effective for individuals. Whether funding a savings account or splitting bills, ACH transfers offer a hassle-free solution.
Pros and cons of using ACH payments
While ACH payments offer convenience and reliability, from paying bills to transferring money between accounts, like any system, they have some limitations.
Pros
A major advantage of ACH payments is their cost-effectiveness. Compared to wire transfers, ACH transfers are significantly cheaper, making them a preferred option for businesses and individuals managing frequent transactions.
ACH payments also have enhanced security features, such as fraud detection and encryption, which help safeguard sensitive information. Moreover, they are perfect for regular payments such as utilities or subscriptions, as the automated process saves time and minimizes the chance of missed deadlines.
Cons
ACH payments aren’t without downside. Processing times are slower than conventional payment methods, typically taking one to three business days. While expedited services are available, they often come with additional fees. ACH payments only work for transactions within America, requiring alternative services like BOSS Revolution for cross-border transactions. It also imposes a daily transaction limit, so confirm with your bank and ensure the set amount aligns with your daily transaction requirement.
ACH payments make transferring money convenient and efficient, but a few precautions can help ensure the process goes smoothly. You can avoid unnecessary issues by paying attention to details and staying proactive.
Verify recipient information
Before initiating an ACH transfer, double-check the recipient’s account and routing numbers. A small error in these details can result in delays or funds being sent to the wrong account. If unsure, confirm the information directly with the recipient to avoid mistakes.
Be aware of cut-off times
Banks often have cut-off times for processing ACH transactions. Transfers initiated after this time may not be processed until the next business day, leading to unexpected delays. Familiarize yourself with your bank’s schedule to time your transfers effectively, especially for payments with strict deadlines.
Monitor your account
Once the transaction is initiated, monitor your account for confirmations. This helps ensure the payment is successful and allows you to quickly spot discrepancies, such as incorrect amounts or duplicate charges. Regularly reviewing your account activity can help identify potential fraud or errors early.
Conclusion
Making ACH payments is simple and hassle-free. All you need is the recipient’s account and routing numbers. ACH network ensures a reliable and secure method for paying bills, transferring funds, or managing business payments.
While ACH transfers generally take one to three business days, the exact time depends on the type of transfer and your bank’s processing schedule. Some banks offer faster options for a fee, but most standard transfers strike a good balance between cost and convenience.
By understanding how to set up ACH payments and the processing timelines, you can confidently manage transactions for both personal and business needs.
Sources: all third party information obtained from applicable website as of December 2, 2024
1.https://www.nationalpayrollweek.com/wp-content/uploads/2020/09/2020GettingPaidInAmericaSurveyResults.pdf
2.https://www.nacha.org/news/same-day-ach-growth-helps-lead-ach-network-solid-third-quarter-results#:~:text=Total%20third%20quarter%20volume%20on%20the%20ACH,up%205.8%%2C%20and%20Direct%20Deposit%2C%20up%202%.
This article is provided for general information purposes only and is not intended to address every aspect of the matters discussed herein. The information in this article is not intended as specific personal advice. The information in this article does not constitute legal, tax, regulatory or other professional advice from IDT Payment Services, Inc. and its affiliates (collectively, “IDT”), and should not be taken or used as such by any individual. IDT makes no representation, warranty or guaranty, whether express or implied, that the content in this article is current, accurate, or complete. You should obtain professional or other substantive advice before taking, or refraining from, any action on the basis of the information in this article.
