ACH transfers are primarily one of two types, but there is a diverse array of subtypes to be aware of too.
An ACH transfer can be one of two types:
They are distinguished by being push payments and pull payments, respectively. Let’s take a look at what this means below.
An ACH credit is a type of ACH transfer where funds are pushed into a bank account. That is, the payer (e.g. customer) triggers the funds to be sent to the payee (e.g. merchant).
For example, when an individual sets up a payment through their bank or credit union to pay a bill, this would be processed as an ACH credit.
An ACH debit is a type of ACH transfer where funds are pulled from a bank account. That is, the payer (e.g. customer) gives the payee (e.g. merchant) permission to take payment from their account whenever it becomes due.
For example, when an individual sets up a recurring monthly payment for a mortgage or utility bill, an ACH debit would be used and their bank account would be debited automatically.
Types of ACH debit
The ACH system supports several different types of debit (listed below). Each is identified by its own Standard Entry Class (SEC) code. An SEC code represents a specific ACH debit use case. Some allow recurring payments, while others only allow one-off payments.
|SEC code||ACH debit name||Description|
|ARC||Accounts Receivable Conversion||An ACH debit used when payment is received for an account receivable in the form of a check. Allows a paper check to be converted into an electronic ACH payment.|
|BOC||Back Office Conversion||An ACH debit used when the in-person purchase of goods or services is done via check, and which will be processed later in the back office. Allows a paper check to be converted into an electronic ACH payment.|
|CCD||Cash Concentration or Disbursement||An ACH debit used when taking a payment from another business or within related entities - usually for the purposes of cash management.|
|CTX||Corporate Trade Exchange||An ACH debit used when taking a payment from another business. Enables the merchant to add multiple addendums to the payment, so they can cover a number of invoices without losing information.|
|IAT||International ACH Transaction||An ACH debit that applies to all collection methods where the end beneficiary of the debit is a non-US based business.|
|MTE||Machine Transfer Entry||An ACH debit used when debit is initiated at an electronic terminal.|
|POP||Point of Purchase||An ACH debit used when converting a check that has been given to the merchant at the point of purchase, or at a manned bill payment location, and will be processed immediately.|
|POS||Point of Sale||An ACH debit used when the debit is initiated at an electronic terminal for a point-of-sale transaction.|
|PPD||Prearranged Payment and Deposits||An ACH debit used when the debit is initiated via a paper-based customer authorisation.|
|RCK||Re-presented Check Entry||An ACH debit used when collecting a debit from a check previously returned due to insufficient funds.|
|SHR||Shared Network Transaction||An ACH debit used when the debit is initiated at an electronic terminal for a point-of-sale transaction.|
|TEL||Telephone Initiated Entry||An ACH debit used when the debit is authorized by phone.|
|TRC / TRX||Check Truncation||An ACH debit used when a debit is initiated under a Check Truncation Program.|
|WEB||Internet Initiated Entry||An ACH debit used when the debit is authorized online.|
For recurring payments, the primary ACH debit types of interest are:
WEB (Internet Initiated Entry)
TEL (Telephone Initiated Entry)
PPD (Prearranged Payment and Deposits)
For the rest of this guide, we’ll refer to these types of ACH debit only, unless stated otherwise.
eCheck vs ACH debit
You may hear the term eCheck being used interchangeably with the term ACH debit. ACH debit is the overarching term used for all debit types in the ACH system. eChecks refer to just a subset of SEC codes - specifically, the types of ACH debit that enable merchants to convert paper checks into an electronic debit (i.e. ARC, BOC, and POP transactions).
Direct Deposit vs ACH debit
A Direct Deposit is a type of payment made via the ACH network. Broadly speaking, all payments made via the ACH network are either Direct Deposits or Direct Payments - and ACH debits are a type of Direct Payment. The broad difference between Direct Deposits and ACH debits is that the former have funds being pushed into an account, while the latter have funds being pulled out of an account.