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What are ACH Payments? A Complete Guide to ACH

Brad Ewin
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Last editedApr 20234 min read

In this article, we will cover:

What is the Automated Clearing House (ACH) Network?

The Automated Clearing House Network, or ACH, is a network used for electronically moving money between bank accounts across the United States. It’s run by an organization called Nacha, formerly the National Automated Clearing House Association (NACHA).

Nacha governs the ACH network, creating and upholding the rules required for the ACH network to operate as a safe and effective payments system. The organization was formed in 1974 and has overseen the development of ACH since then: in 2021 over $72.6 trillion worth of funds was transferred as ACH transactions, a year-on-year increase of over 17 percent.

Transaction types include government, consumer, and business-to-business transactions, as well as international payments.

The ACH network may also be referred to as the ACH payment system, scheme, or simply as ACH.

What is an ACH payment?

An ACH payment is a type of electronic bank-to-bank payment. The ACH system is a way to transfer money between bank accounts, rather than going through card networks or using wire transfers, paper checks, or cash.

The Automated Clearing House network is a US-based network that also covers the U. S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.

ACH payments are not generally made in the UK, Eurozone, or anywhere else outside the United States and associated territories, because although international ACH transfers are possible, typically they are sent via Wire (largely due to speed). ACH payments are also commonly referred to as ACH transfers or transactions. 

How to collect ACH Debit payments with GoCardless


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ACH Categories: Direct Deposit vs Direct Payment

There are two main categories of ACH transactions: direct deposits and direct payments.

Direct Deposit is used for payments from businesses or the government to a consumer, particularly for payroll, as well as government benefits, tax refunds, interest payments, and more.

Direct Payment covers the electronic movement of funds to make or receive payments, both by individuals or organizations. Examples include sending money to family, purchasing a product or service, paying bills, or supporting a not-for-profit organisation. Direct Payment ACH transactions are the primary focus of this guide.

Types of ACH payments

Within the Direct Payment category, there are two main types of ACH transfers, known as ACH Credit and ACH Debit.

The main difference between the two is whether the money is 'pushed' or 'pulled' between accounts.

ACH Credit pushes funds into an account, meaning that customers are responsible for initiating the transfer of funds to your business. The payer will 'push' the money from their bank account to yours.

On the other hand, ACH Debit pulls funds out of an account. With a customer's authorization, a business can collect payments directly from their customer's account.

To learn more, read our guide about the difference between ACH Debit & Credit.

Automate payment collection and reduce transaction fees with ACH Debit.

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How long does an ACH payment take to process?

ACH transactions typically take 3 working days to appear in your bank account. NACHA states that almost all ACH payments are eligible for same-day processing, but it's important to note that Same Day ACH is a different product and you will almost certainly pay a premium to have the transaction go through the same day.

Learn more about ACH Payment Timings, where you can view the processing timeline in more detail. We’ve also rounded up some of the options for taking instant ACH payments here.

How much does it cost to process ACH payments?

The median internal cost for processing ACH payments is $0.29 per transaction.

However, the total cost associated with accepting ACH payments varies depending on a number of factors. There are two routes available to businesses that would like to access ACH payments, direct and through a third-party payment processor. 

It can be costly to obtain direct access, due to fees, employee wages, and the time taken to implement. Nonetheless, this can be suitable for the largest businesses, although our full guide to ACH fees goes into this in more depth. 

A popular option is to pay for ACH access through a payment processor. This drastically reduces the time required to access the scheme, as well as simplifying ongoing costs and providing a payment solution that is ready to use immediately. Learn more about the two routes to getting set up with ACH, or find out about getting started collecting ACH payments here.

Benefits of ACH payments

1. ACH is cheaper than accepting card payments

With ACH, funds are transferred directly from one account to another and not routed through expensive card networks, which charge 1.3%-3.5% as a base fee.

2. ACH Debit lets you decide when you get paid

Unlike wire transfers, ACH Debit is a pull payment that gives you control over the transfer date, frequency, and amount.

Taking control of your incoming payments guarantees you have better cash flow in your business. Improved cash flow enables you to undertake realistic business planning and relieve the wasted time and stress of chasing late payments.

3. Low payment failure rate, higher customer retention

Bank accounts do not expire or become lost, so payment failure and accidental customer churn rates are significantly reduced compared to card payments, with their failure rate of 10-15%. In the relatively rare event of payment failure, attempts can be made to pull the payment from your customer's bank automatically, using an intelligent retries product such as Success+.

4. No more chasing late payments

By reducing failed and late payments, ACH Debit frees up the time businesses otherwise spend on dealing with these issues, creating more space to get other essential tasks done. 

5. Automation saves time and money

By integrating automated payment collection via ACH Debit with existing accounting software, businesses can save even more time on financial admin such as bank reconciliation. 

6. It's easy to start accepting ACH payments

In just a few clicks, you can create a mandate and send a link to your customer who completes the online form - you can then collect payments as required.

"Paying with a low-cost method like ACH debit really makes a big difference for small businesses. It allows us to reduce costs, and, as a result, more money stays in the local economy." - Carrie Pollak Owner, Diaper Stork

ACH: Key takeaways

  • ACH stands for Automated Clearing House, run by Nacha, the former National Automated Clearing House Association.

  • ACH payments are a type of electronic bank-to-bank payment only available in the US and associated territories.

  • Payments made via the ACH network are cheaper and enjoy a higher success rate than alternative methods, such as card payments.

  • ACH Debit payments are accessible to many American consumers and increase customer retention.

  • It’s easy to set up ACH Debit with GoCardless and is worth consideration by any business taking recurring payments.

  • Automating payment collection with ACH Debit saves time on tedious manual admin. GoCardless integrates with over 200 partners including Xero, QuickBooks, Zuora, and Sage.

  • Accepting ACH Debit payments with GoCardless puts you in control of getting paid, eliminating the stress of late payments while saving you time and money.

It's quick and easy to start collecting payments with ACH Debit.

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Who is GoCardless?

GoCardless is the simplest way to collect payments via ACH debit. We can help your business automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices.

Find out how GoCardless can help you with ad hoc payments or recurring payments.

Automate payment collection with ACH Debit to lower costs, reduce failed payments and save time on financial admin.

NextACH Debit vs ACH Credit: A Comparison
Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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