ACH Transfers: Everything You Need To Know

What Are ACH Transfers?

An ACH transfer uses an Automated Clearing House, a network organized by the National Automated Clearing House Association for transferring funds between two banks.

How Does an ACH Transfer Work?

An individual or corporation must initiate a direct transaction by providing the necessary information to a financial institution. Then, the financial institution inputs the ACH entry along with all of its other ACH requests at a specific time of day. Finally, the funds are transferred. This process may take three to five days, depending on the type of transaction.

For example, if your employer pays you through direct deposit, this is how the money would move:

1. You provide your bank account information to your employer.
2. Your employer sends an electronic payment file to its bank.
3. Your employer’s bank sends the payment to an “ACH Operator.”
4. The ACH Operator sends your money to your bank
5. You receive your money in your checking or savings account, or each account can receive a share of the deposit.

Keep in mind that there are some limitations on ACH transfers. Depending on your bank, there are cutoff times for when batch transfers. Check with your bank about the ACH rules and how long you should expect a transfer to take.

What Is Needed for an ACH Transfer?

This is what you to receive money from an ACH transfer:

• A checking account, savings account, payroll card or prepaid card to receive ACH deposits
• Account information

The originator will request a voided check or make you fill out a form to get your account information.

ACH transfers can be broken down into deposits and receipts.

Deposits

•  Direct deposit: Used for payroll, expense reimbursement, and pension and dividend payments
•  Cross-border: Used to send payments to Canada, Mexico, Panama and select European countries
•  Trade: Used to pay suppliers through CCD+ and CTX formats
•  Taxes: Used to make local, state and federal tax payments