Real Time Payments VS ACH: How Long Does ACH Transfer Take?
In this article we will delve into the differences between Real Time Payments vs. ACH, including their benefits and limitations.
When it comes to bank transfers in the United States, there’s traditionally been one game in town: ACH (automated clearing house) payments. What businesses may not realize, however, is that there’s another network that can handle transfers between FDIC-insured institutions, Real-Time Payments (RTP).
Below, we’ll dive into the differences between Real Time Payments vs. ACH as well as their benefits and limitations.
|ACH||Real Time Payments|
|Ideal For||Recurring payments, debits, transfers exceeding $1 million||Disbursements, payroll and contractor payments, after-hours payments|
|Transfer Time||Up to 3 business days||Immediate|
|Standout Features||Universal availability, can take credits and debits, transactions are reversible||24/7 availability, funds available almost immediately|
|What’s Missing||24/7 availability, fast access to funds||Debit capability|
Table of Contents
- What Are Real Time Payments?
- Real Time Payments VS ACH
- What’s The Difference Between ACH & Real Time Payments?
- Are Wire Transfers The Same Thing As Real Time Payments?
- Which Is Best For My Business Needs: ACH Or Real Time Payments?
- Real Time VS ACH Comparison: The Final Verdict
- FAQs: Real Time Payments VS ACH
What Are Real Time Payments?
Real-time payments refer to credit push payments made through the Clearing House’s RTP network. These payments are settled individually and near-instantaneously and cannot be reversed.
Real Time Payments VS ACH
Though they are both run by the Clearing House, the real-time and ACH payments occur across separate networks and infrastructure. Real-time payments are much faster than ACH payments, but can only be initiated by the payer; debits are not possible across the RTP network.
Like ACH payments, RTP payments are offered to businesses through compatible payment gateways. While it’s still a relatively uncommon feature, services like Dwolla do currently offer real-time payments.
- Allows bank account-to-bank account transfers
- Cheap, especially compared to credit card network fees
- Allows for both credit push and debit pull transactions
- Erroneous transactions can be corrected
ACH payments essentially power almost all financial transactions within the United States that involve a bank account. Even the final settlement payments of credit transactions are generally completed via an ACH payment. The ACH network operates during traditional business hours Monday through Friday. ACH payments are cleared in batches.
So how long does an ACH payment take to complete? While funds can be available within a few hours via credits, it can take up to three days for an ACH payment to settle.
Real Time Payments Overview
- Makes funds available almost immediately
- Operates 24 hours a day, 7 days a week, including holidays
- Allows for credit push transactions
- Transactions are relatively cheap
The RTP network is much newer than ACH, having only been around since 2017. As such, it’s not quite as readily available as ACH, but the number of institutions using the network is growing.
As the name implies, transactions are settled almost immediately. Because of this RTP transactions are essentially final–there’s no way to reverse charges within the network itself (you may still be able to work something out with the recipient). Unlike ACH, real-time payments are cleared individually rather than in batches.
What’s The Difference Between ACH & Real Time Payments?
Speed is just one of the differences between real-time payments and ACH, with RTP being considerably faster. Compared to ACH, RTP has narrower applications: RTP transactions can only be used to disburse funds, not collect them.
Though there is some overlap in their use cases, it’s important to remember that RTP isn’t a replacement for ACH. It’s an alternative way to send a direct payment.
Both Real Time Payments & ACH Offer…
- Credit push payments from an account based in an FDIC-insured institution
- Low cost transactions
- Transactions of up to $1,000,000 (Same-day ACH)
- A B2B alternative to credit card payments
- A high level of security
Only ACH Offers…
- Universal availability among financial institutions
- Debit pull transactions (initiated by receiver of payment)
- Transactions larger than $1 million (except for same-day ACH)
Only Real Time Payments Offers…
- Instant payments
- 24-hour, 7 days a weeks service
- Advanced remittance data
Are Wire Transfers The Same Thing As Real Time Payments?
Wire transfers are another quick way to send money, but they are completely different payment methods than real-time payments.
Wire transfers are sent through the FedWire Funds Service, which is distinct from both ACH and RTP. Wire transfers:
- Make funds available typically within the same day
- Are available during traditional business hours
- Can only be used for credit pushes
- Are settled individually
- Can be initiated with cash at some non-bank providers
If you want to see how wire transfers stack up against ACH payments, check out our ACH vs. wire transfer feature.
Which Is Best For My Business Needs: ACH Or Real Time Payments?
Both ACH and the RTP network have applications for business, particularly when it comes to disbursing payments to employees, contractors, and suppliers. These direct payments networks can save businesses a substantial amount of money by cutting out expensive credit card network fees.
Choose ACH If…
- You need debit pull capabilities
- You’re working with a broad spectrum of payees whose banks may not have yet joined the RTP network
- You need to send payments larger than $1 million
Choose Real Time Payments If…
- You want funds you payout to be immediately available
- You can to be able to make payments around the clock
- You don’t need debit pull capabilities
Real Time VS ACH Comparison: The Final Verdict
With the costs of credit card transactions rising rapidly, merchants are increasingly looking for alternative ways to send payments without mailing a paper check or sending an armored truck full of cash. ACH and real-time payments offer the ability to send a payment directly from your bank account. Look for RTP to become a more common offering from payment processors in the near future.
FAQs: Real Time Payments VS ACH