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ACH Processing

ACH Processing

We provide merchant services payment systems for all businesses

What is ACH payment processing?

ACH refers to the Automated Clearing House, a U.S. payment processing network that’s managed by the National Automated Clearing House Association (Nacha).

ACH payments are electronic fund transfers between banks. So, ACH payment processing is a convenient way to send and receive money using only a bank account number and routing number — no cash, checks, or cards necessary.

There are two main kinds of ACH transfers:

  • An ACH debit transactions “pulls” or withdraws funds from an account. (Ex. Your bank automatically withdraws a monthly membership fee from your customer.)
  • An ACH credit “pushes” or sends funds from an account. (Ex. The customer activates auto-pay for their monthly gym bill in their bank account, so their bank automatically sends you the fee.)

Businesses save time using ACH payments because they eliminate the need to deal with fraud-prone paper checks, handle recurring billing manually, or hunt down payments sent by mail. You simply ask your customers or vendors to authorize ACH transactions.

How does ACH payment processing work?

Here’s a high-level example of what happens when you request an ACH payment:

  1. Your company sends an invoice to your client.
  2. The client submits the invoice to their bank, known as the Originating Depository Financial Institution (ODFI).
  3. The client’s bank enters the invoice amount and necessary account information then batches it with the day’s other ACH payments.
  4. Your batched invoice payment is sent to your bank, known as the Receiving Depository Financial Institution (RDFI), after it’s cleared.
  5. Your bank credits your account for the invoice amount.

ACH payment lookalikes

See how to distinguish ACH payments from similar terms:

  • ACH vs. electronic funds transfer (EFT): EFT is an umbrella term that refers to ACH payments, e-checks, wire transfers, and other kinds of digital payments. ACH is just one type of EFT.
  • ACH vs. e-check: E-checks are virtual checks that can be processed using the ACH network. Most importantly, e-checks are governed by different rules than ACH payments.
  • ACH vs. wire transfer: Generally, wire transfers are real-time bank-to-bank transfers, while ACH transfers are processed in batches and take several days to process.