ACH credit, meaning a deposit into a bank account through the Automated Clearing House, is a common form of payment used by individuals, businesses, and governments.
In this article, we’ll share the use cases for an ACH credit, answer common questions we receive about the ACH network, and compare ACH credits and debits directly.
This article is part of our series on banking basics, ranging from opening different types of bank accounts around the world to understanding how various aspects of the banking system operate.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- ACH Credit Meaning
- ACH Debit vs ACH Credit
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
ACH Credit Meaning
ACH credit, meaning a payment through the ACH (Automated Clearing House) network, is a form of electronic payment or EFT (Electronic Funds Transfer). Unlike an ACH debit, an ACH credit transaction is “pushed” by the sending party from the originating bank account to the receiving account.
An example of an ACH credit is when an individual schedules an ACH payment to a merchant in order to pay for products or services. In other words, they are using the ACH payment system to complete a purchase. This may be the preferred payment method for a company if they do not have alternative payment processing arrangements.
Alternatively, a business can use an ACH credit to schedule monthly salary distributions to their employees. This is a common use of the ACH network as it allows businesses to make adjustments month-to-month while still sending payments in a cost-effective and efficient manner.
Lastly, governments will also use ACH credit to send a direct bank transfer to the recipients of government benefits and pension programs. Similar to businesses, this type of financial transaction allows governments to make adjustments on an ongoing basis as needed.
Of course, the specific method of ACH credit entry will depend on the party originating the transfer, the type of account they have, and the options available to them. Not surprisingly, the most common type of ACH credit entry for individuals is an ACH payment that they arrange through online banking.
In the following section, we’re going to compare the meanings of ACH debit and ACH credit directly.
ACH Debit vs ACH Credit
The main difference between ACH debit and ACH credit is that ACH debit refers to a “pull” transaction where the payment is initiated by the recipient while ACH credit refers to a “push” transaction where the payment is initiated by the sender. Additionally, ACH debit and ACH credit are typically used in different scenarios, which we outlined below.
For example, ACH debit is the most common form of payment for utility bills, mortgage payments, and other regularly recurring payments that are automatically debited from an individual’s bank account.
On the other hand, ACH credit is the most common form of payment for salaries, benefits, and by individuals sending payments to merchants.
That said, both ACH debit and ACH credit are cost-effective, efficient, and secure forms of payment that can be used by individuals, businesses, and governments to streamline their payment needs.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into the meaning of ACH credit. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Is the Meaning of “Automated Clearing House (ACH)”?
The meaning of “Automated Clearing House (ACH)” is an electronic payments network that is used to facilitate debits and credits within a domestic banking system. ACH payments are cost-effective, secure, and efficient. As a result, businesses, governments, and individuals commonly use them.
Why Did I Get an ACH Credit?
The reason why you got an ACH credit is because someone sent a payment to your account. This could be a payment from an employer, a government agency, another individual, or a returned payment from a merchant. If you do not recognize the payment, you should check with your financial institution to confirm the origins.
What Does ACH Mean in Banking?
In banking, ACH means Automated Clearing House, which is a payment network that enables Electronic Funds Transfers (EFTs). ACH is a form of payment that is commonly used to complete domestic transactions within a financial system, especially those that require regular low cost and secure payments like salary, benefits, and utilities payments.
Is It Safe to Accept ACH Payments?
Yes, it is safe to accept ACH payments. However, you should only accept payments (ACH of otherwise) from trusted or known parties. If you receive an ACH payment from an unknown party, you should contact your financial institution. They can then inform you of the origin of the payment.
Why Do Companies Use ACH Payments?
Companies use ACH payments to pay employees, contractors, and service providers because they are cost-effective, efficient, reliable, and secure. In other words, they offer all the benefits that both companies and the receiving parties want from a payment. Of course, if the company is sending payments outside of the domestic banking system, it will need to use an alternative transfer method.
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