How to Make ACH Payments

There are two ways to make ACH payments. One option is to set up ACH Debit by providing your bank account details and authorisation to the organisation taking the payment. Alternatively, you can make an ACH Credit payment electronically from your bank account, using the banking details of the recipient of the funds.

As the world of digital commerce continues to grow, businesses are offering more and more online payment methods. One method that is growing in popularity is ACH payments.

ACH payments are electronic payments routed through the Automated Clearing House (ACH) network, which connects most banking institutions in the United States. These transfers are made through a technology known as eChecks, which are essentially a digital version of traditional paper cheques. Keep reading to find out how to make ACH payments and what information is needed to make an ACH payment.

In this article, you will learn:

• The different types of ACH payments you can make

• What you need to set up ACH payments

• How to make ACH payments

• How long ACH payments take

• How much ACH payments cost

• How to accept ACH payments if you are a business

How to Make an ACH Payment

Two options are available within the ACH network for making payments - ACH Debit and ACH Credit.

ACH Debit

ACH Debit is a 'pull' payment initiated by the payee. This means that you authorise an organisation or business to 'pull' funds from your account on the dates and for the amounts agreed with you in advance.

Payments like these will generally be for regular monthly outgoings such as utility bills, insurance premiums, or similar. If you are a business, you may pay for some recurring services in this way.

ACH Credit

ACH Credit is a 'push' payment initiated by the account holder. 

Unlike ACH Debit there is no need to provide account details to the payee. The payment is set up and executed by yourself and your bank, with the payee passively waiting to receive the funds. 

ACH Credit is often used to push salary into employee accounts. However, consumers are just as likely to use it to pay bills, make purchases, send money to friends or family, and so on.

How to make an ACH Debit payment

To begin allowing payment from your bank account via ACH Debit, you will need to provide your account details and authorisation to the organisation collecting the payment. You will be directed through the authorisation process by the organisation you are paying. 

There are several ways authorisation can be given:

• through a paper form that you complete and return

• verbally over the telephone

• online via a webpage or hosted form

Once authorisation is completed, the organisation can pull recurring payments from your account without you needing to take further action as long as the payments remain the same. Any changes to the payment amount or frequency require that you receive an ACH customer payment notification with advance notice of the changes.

How to make an ACH Credit payment

To make an ACH Credit payment, you will need the banking details of the person or organisation you want to send money to. You will also need access to some type of online banking feature, either directly through your bank or via a third-party service.

Here's how you can complete ACH Credit transfers:

Online banking

It is likely your bank will provide access to online bill pay features which makes it easy to transfer money. You may have to contact them to get this set up.

Using an app on your mobile device or by logging into your online banking account via PC, you will need to enter the following information:

• the recipient's banking details

• the amount you wish to send

•  whether the payment is to be made now or scheduled in the future

You need to be aware that ACH practises batch processing, so credit transfers are not instant. However, they are generally faster than ACH Debit payments, as discussed below.

Payment Processors

There are numerous third-party payment processors (TPPPs) that can connect to your bank account and through which you can complete ACH Credit payments. Providers such as PayPal offer money transfer services that are routed through the ACH network. 

To make an ACH payment, log in to your TPPP app or online account and provide the recipient's banking details, the amount you are sending, and any other information required, and follow the process.

How much does it cost to make ACH payments?

It's important to know how much it costs to make ACH payments, but it does depend on your bank or payment processor and exactly what kind of payment you make. 

ACH Debit transactions are generally free unless you use an expedited service like Same Day ACH. On the other hand, ACH credit transactions may charge you a fee if you are making a payment to a different bank from your own.

How long do ACH transfers take?

According to ACH scheme rules, ACH Credit payments can be processed on the same day or in one or two business days. Exactly how long it takes for the money to clear in the recipient's account will depend on the financial institutions involved.

ACH Debit must be processed the next day, per scheme rules, and generally takes 3 - 4 days to clear in the payee's account. The batched nature of ACH transactions means that the time of day the transaction is made can impact how long it takes.

Click here to find out more about ACH timings.

How to accept ACH Debit payments

Among several other significant benefits, it is cheaper and less labor-intensive for a business to collect payments by ACH Debit whenever possible.

Onerous regulatory and financial requirements mean becoming a direct ACH submitter is unrealistic for most businesses, so why not have a global leader in bank payment services such as GoCardless do all the heavy lifting on your behalf?

Accepting ACH Debit payments via GoCardless is more reliable, more secure and much cheaper than accepting card payments.

Watch the short video below to learn how PremierePC saves $1200 on card transaction fees every month by offering ACH Debit as a payment option to their customers.

For invoicing businesses, ACH Debit is a 'pull' payment that enables you to automate payment collection for your chosen dates. This puts you in control and eliminates late payments.

Additionally, GoCardless can help automate specific financial admin tasks. Along with no failed card or late invoice payments, you can save many hours on your payment collection and accounting process through automation.