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What is an ACH withdrawal?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedApr 20232 min read

The Automated Clearing House, or ACH, is a secure network used by banks to enable fast, secure payments between accounts. You might have already heard of ACH credits and debits – but what is an ACH withdrawal? Keep reading to learn more about what ACH withdrawals are and how this type of transaction works.

What is an ACH withdrawal?

The ACH debit and ACH withdrawal are virtually identical. Both phrases can be used to describe the process of pulling funds from one account and placing them into another.

In comparison to ACH deposits, which are push-based, ACH withdrawals are pull-based. For example, an employer might deposit an employee’s paycheck directly into their bank account using ACH deposit. With ACH withdrawal, you might set up automatic bill payments to be taken from your account each month.

For businesses, ACH withdrawals offer a simple, electronic method for accepting payments. Payments are taken, with permission, from a customer’s account on the date of your choosing.

How does an ACH withdrawal work?

This type of transaction uses the USA’s ACH network. You can set up ACH withdrawals using bank account details, even if the sender and receiver bank at different institutions.

Businesses typically use the ACH withdrawal process as an easy way to accept payments for products and services, both one-time and recurring. Here’s how the process works:

Step 1: The customer authorizes the transaction, giving permission for the business to pull funds from their bank account. They provide all necessary banking details as part of authorization.
Step 2: The business transmits the transaction details to its bank or other ACH provider, who requests the funds from the customer’s bank. Once the payment is pulled into the ACH network, it’s batched together along with other funds for processing.
Step 3: The payments are processed, cleared, and deposited into the business or recipient’s account.

What are the pros and cons of ACH withdrawals?

There are multiple benefits to using the ACH withdrawal method, both for customers and businesses. Batching multiple payments together for processing helps keep fees low in comparison to alternative payment methods like credit cards or wire transfers. With automatic processing via the ACH network, ACH withdrawals also cut down on admin time. There’s no need to manually chase up on each invoice, as the payment is automatically pulled on the intended date.

However, there are a few limitations to be aware of. ACH payments do take some time to clear, typically between two to three business days. Same-day payments are available for an additional fee, but often have an upper transfer limit.

How to accept ACH withdrawal payments

If you want to reap the benefits of ACH withdrawal as a payment option, you’ll first need to set up a merchant account with your bank or a designated ACH provider. Once you have this in place, you’ll need to gather some basic details from your customer to facilitate payment in the system. To begin with, request payment authorization from the sender. This only needs to be completed once, even for recurring payments.

Banking details required for an ACH withdrawal include:

Sender’s name
Bank name
Type of account (checking or savings)
Account number
Routing number

This information is passed on to the ACH provider for processing. If customers need to cancel the payment at any time, they can send the bank a “stop payment order” or withdraw authorization.

GoCardless enables businesses of all sizes to accept ACH withdrawal payments from customers. While setting up and managing ACH payments yourself involves time and busywork, GoCardless automates the full process for streamlined authorization and processing. You can manage one-off and recurring payments, all using a simple online tool.

We can help

GoCardless helps you 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.