Definition
An ACH transfer is an electronic bank-to-bank payment in the United States sent through the Automated Clearing House network. It is the most common way businesses pay invoices because it is inexpensive and reliable. Standard ACH payments usually settle in one to two business days, and Same Day ACH is also available.
Also called: ACH payment, ACH, Automated Clearing House, Direct deposit
ACH transfer in practice
To receive ACH payments, you give clients your bank name, routing number, account number, and account type, either on the invoice or through a payment link from your processor. Ask clients to include the invoice number as the payment reference.
ACH costs far less than a card payment. Banks often charge nothing to receive ACH, and payment processors typically charge a small percentage with a low cap or a flat fee, which makes ACH attractive for large invoices.
ACH credits are pushed by the payer. ACH debits are pulled by the payee with the payer's authorization, which is how autopay and direct debit work. Debits can be returned for several days if the account lacks funds or the payment was unauthorized.
Example
A marketing agency invoices a client $8,400 with Net 30 terms and ACH details. The client schedules the payment on day 28, and the money lands in the agency's account two business days later.
Frequently Asked Questions
How long does an ACH transfer take?
Standard ACH usually settles in one to two business days. Same Day ACH can settle the same business day if submitted before the bank's cutoff, subject to a per-payment limit.
Is ACH the same as a wire transfer?
No. ACH payments are batched and cheaper but can take a day or two and some can be reversed. Wires are sent individually, settle faster, cost more, and are generally final.
Can I accept ACH payments from international clients?
Standard ACH is for US bank accounts. International clients usually pay by international wire, or through a payment provider that collects locally and converts currency.
Related terms
- Wire transfer A wire transfer is an electronic payment sent individually from one bank to another, usually settling the same day for domestic transfers and within one to five business days internationally.
- Routing number A routing number is the nine-digit code that identifies a US bank or credit union in domestic transfers.
- Autopay Autopay is an arrangement in which a client authorizes a business to charge their card or debit their bank account automatically each time an invoice is due.
- Payment processing fee A payment processing fee is the charge a business pays to accept a card or online payment, usually a percentage of the amount plus a small fixed fee per transaction.
- Remittance advice Remittance advice is a notice a client sends to a supplier to say a payment has been made and which invoices it covers.
- Bacs payment A Bacs payment is an electronic bank transfer between UK accounts processed through the Bacs scheme, which takes three working days to clear.
- Interac e-Transfer Interac e-Transfer is a Canadian service for sending money between bank accounts using only an email address or mobile phone number.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.