Learn about ACH payments

In this post, we’ll take a look at what ACH payments are and how your business can benefit from using this mode of payment.


What are ACH payments?

Automated Clearing House (ACH) payments are an electronic transfer of funds between banks. These payments are transferred through the United States ACH network, which connects thousands of financial institutions nationwide.

ACH transactions are secure, fast, and cost-effective. While there are other types of electronic transfers such as credit and debit card payments, they aren’t ACH transactions. In fact, ACH payments are specific to bank account transactions.

To complete a transaction, the entity requesting a payment needs access to bank account information from the other entity involved. For instance, let’s say you need to deposit money in your employee’s bank account. You’ll need to get their bank account information, which includes the employees’ bank name, type of bank account (savings or checking), recipient account’s number, and the bank’s ABA routing number.

This information is used to transact payments to the correct account. The same information will be required by the billers when making pre-authorized withdrawals from their bank account.

ACH payments are mostly electronic from beginning to end. However, some users convert paper checks to electronic payments and the money is transacted through the ACH system.


How do ACH payments work?

When a customer sends you a payment through ACH, the funds will show up in your bank account as a direct deposit. Here’s a brief explanation of how ACH transactions work:

Sending payments: To begin, a customer has to authorize the transfer of an ACH payment. Similar to signing a credit card receipt or a paper check, they are required to sign an ACH authorization form (or give verbal consent). The ACH system enables you to set up one-time payments, recurring payments, or a series of payments made on specific dates.

Receiving payments: After an ACH transaction is authorized by the bank, the agreed-upon payment is transferred from your customer’s bank account into your account. Payments are typically processed within 3 to 5 days, although sometimes it’s received on the same day. Similar to paper checks, if there are insufficient funds in your bank accounts, the ACH payment will simply “bounce”.


Benefits of ACH payments

Let’s look at the key benefits of ACH payments for businesses:


  • Easier to track than check payments. ACH transactions are easier and faster to handle as compared to conventional payment methods such as check payments. As opposed to checks, ACH payments can be automatically set up, require less time to process (as checks have to be mailed), and cannot be lost.
  • More cost-effective than credit cards. For organizations receiving payments via credit card transaction (which charge around 2% to 4% per transaction, plus setup and operational fees), ACH payments often cost less to process. This is especially useful for businesses that have to collect several recurring payments.
  • Facilitates long-distance payments. Businesses can remotely receive ACH payments, just like credit cards. If a customer doesn’t want to give you their credit card information or don’t have one, ACH can be a great alternative.


Are ACH payments a type of EFT?

While ACH transactions are a type of Electronic Fund Transfer (EFT), ACH is specific to the United States, and each country uses their own domestic payments system. If you do not live within the U.S, you should check with your banking provider to learn more about how funds are transferred.



ACH payments are an easy, secure, and fast way to transfer funds between banks. They are more cost-effective than credit cards and also undergo a rigorous verification process before and during the transfer.

What payment options do you offer your customers? Let us know by commenting below.

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