What is an ACH payment? It is a form of electronic funds transfer that uses the ACH network in order to offer fast, secure, and affordable transfers.
In this article, we’re going to break down the nuances of sending an ACH payment, provide specific examples, and share the steps to send an ACH payment today.
This article is part of our free series on sending money, including the ultimate guide to bank checks, which you can access here.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- What Is an ACH Payment?
- What Are Examples of ACH Payments?
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
What Is an ACH Payment?
ACH payment is an electronic funds transfer known as an Automated Clearing House payment. To send an ACH transfer, the sending party needs to initiate the transfer through an online payment system with their financial institution.
When sending a payment through the ACH network, the sending and receiving parties benefit from a secure bank payment, direct deposit into the receiving account, and a significantly faster payment method than traditional payment processing.
In short, an ACH transaction is an electronic funds transfer (EFT) payment that leverages a national electronic payment system in order to facilitate fast, secure, and direct transfers between accounts at banks in the United States.
How Does an ACH Payment Work?
An ACH payment begins with the request and authorization of a payment from a sending party through the ACH network. This requires the sending party to provide the name, account number, routing number, and transaction amount of the receiving party.
The payment is then initiated by the sending bank through the ACH network, routing to the receiving bank using the information provided by the sending party. The receiving bank then receives the incoming transfer and deposits the proceeds into the account of the intended recipient.
What Are Examples of ACH Payments?
There are a number of different examples of ACH payments, including direct deposits, payment processing transactions, bank-to-bank transactions, and more. We will take a close look at each of these examples below.
Direct Deposits
Direct deposits are a form of funds transfer that allow for a third party to directly deposit funds into the account of an individual or a business. Common examples of direct deposits include receiving salary, receiving government benefits, recurring payments to vendors, and more.
Payment Processing
Payment processing is a form of transaction that can involve ACH payments. However, payment processing also includes other forms of payment methods as well, including credit card processing, debit card processing, and more.
Bank-to-Bank Transaction
A bank-to-bank transaction is one of the most common examples of an ACH payment. It involves the processing of a transaction from a sending party at one bank to a receiving party at another bank. Using the ACH network, an individual is able to securely and quickly send transfers this way.
Other Payment Methods
There are a number of other payment methods that fall under the umbrella of ACH payments. These include direct payments, cash concentration, prearranged payments, point of purchase transfers, and more.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into what an ACH payment is. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
Do I Have to Pay Back ACH Credit?
If you receive an ACH credit into your bank account, this means that money has been deposited into your bank account. If you were not expecting a deposit or you are unable to verify the source of the deposit, you should contact your financial institution to confirm the details.
What Is an ACH Bank Transfer?
An ACH bank transfer is a form of electronic funds transfer that uses the ACH network in order to send transfers between banks in the United States. Thanks to the robust network, ACH payments are fast, secure, and affordable.
What Is Needed for an ACH Transaction?
In order to send an ACH transaction, the sending party needs to know the name of the receiving party, their account number, the related routing number, and the amount that they plan to send. This information is then provided to their financial institution in order to execute the transfer to the receiving party.
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