You may have used an ACH transfer without even knowing it. To briefly summarize, an ACH transfer is a method to coordinate electronic payments and automated money transfers. Continue reading on this post to learn what ACH transfers are and how they work!
- Consumer debit: Used for accepting one-time or recurring payments from consumers
- eCheck: Used to convert paper checks into ACH debits that can be processed electronically
- Corporate collection: Used to collect payments through CCD+ and CTX formats
- Concentration: Used to consolidate funds into a single account
Fees for ACH processing vary. All banks must pay an annual fee and nominal fees for each transaction.
Pros and Cons of ACH Transfers
The ACH network is used for a majority of fund transfers in the U.S., such as direct deposit, tax refunds and payment services like PayPal or Venmo. Here are some pros and cons of using ACH transfers:
- Payments are easier to track, can’t get lost and are delivered sooner than if they were sent by mail.
- You don’t have to remember to make payments and are less likely to get hit with late fees if you make recurring payments.
- Your personal information is hidden from someone who might intercept a check.
- The ACH transfer amount limit is $100,000 per day.
- It may be easier to overdraw an account when payments are automatically deducted.
- It’s easy to forget when bills are paid, leading to double payments and continued payment for services you don’t want.
- Payments must be received by the transaction cutoff: 10:30 a.m. EST for morning submissions and 2:45 p.m. EST for afternoon submissions.
Alternatives to an ACH Transfer
There are multiple options for making payments electronically such as the traditional wire transfer or using payment apps.
Similar to an electronic check, wire transfers directly moves funds from one bank account to another through routing numbers. Wire transfers are usually faster than ACH transfers. Unlike ACH transfers, wire transfers are final. Because ACH transfers take longer to settle, they can be reversed or pulled back.
However, the costs may differ since ACH transfers have very low fees associated with them. Wire transfers can be quite costly. Wells Fargo will charge $30 for outgoing wire transfers while Bank of America charges $30 for domestic transfers and $45 for international wire transfers.
Payment apps such as PayPal and Venmo use the ACH network through their platforms. These apps are the closest thing to an ACH transfer app.
Zelle is a bank-to-bank platform that does not rely on the ACH network. Zelle money transfers uses it’s own system resulting in a faster transfer time.
Whether you’re sending or receiving money, ACH transfers might be the way for you. Not only is it convenient for the user, but it’s also faster than mailed payments and cheaper than wire transfers.
It is important to understand how ACH transfers works and the different aspects to it. Check out HMB’s in-depth list on Best Bank Promotions!