What Are The Types of ACH Payments?

Automated Clearing House (ACH) payments power most of the bank-to-bank transfers in the United States. ACH is so common that many of us take it for granted, not realizing that the system is used to finalize credit card payments, for direct deposits of paychecks, and in check cashing. Below, we’ll demystify the types of ACH payments and pull back the curtain a bit on how ACH works.

ACH Transaction Structure

ACH transactions allow money to be sent from or received by bank and credit union accounts. These transactions are batched and sent by the sender’s institution to a middle entity called an ACH operator that sorts and routes the transaction to the receiver’s financial institution. The receiving account is then credited or debited. Batches are sent four times each business day.

There are two ACH operators:

• The Clearing House: A payments company owned collectively by some of the largest banking institutions in America, including JPMorgan Chase, Bank of America, Wells Fargo, and US Bank.
• The Federal Reserve: The federally chartered, centralized banking system of the United States. It’s mandated with maximizing employment and stabilizing prices, as well as regulating banks.

ACH payments can be settled when the Federal Reserve’s settlement system is open. The system is closed on weekends, federal holidays, and between the hours of 6:30 p.m. and 7:30 a.m. ET.

Types Of ACH Transactions

ACH transactions can be broken down into two main categories: ACH credits and ACH debits.

Same-Day ACH

A relatively new type of ACH payment was introduced in 2016. As the name implies, these are expedited ACH payments that are settled on the same day they are sent. To be eligible for Same-Day ACH, files must be submitted to the ACH operator by 4:45 p.m. ET. Same-Day ACH transactions are capped at $1 million.

ACH Payment Codes

While ACH payments probably fall into the categories above, the ACH network does code payments differently depending on characteristics such as whether the transaction is consumer or corporate, whether it’s recurring, and any authorization required beforehand. These codes will generally be invisible to both businesses and customers unless you’re dealing with payment processing infrastructure in-house.

ACH Credit Codes

ACH Debit Codes

ACH Payments VS eChecks VS ETFs

The terms echeck and EFT are often used in discussions of ACH payments, but have their own distinct meanings:

• EFTs: EFT stands for electronic fund transfer, and it refers to the process of transferring money electronically from one bank account to another bank account. ACH payments and e-checks are both forms of EFT. In fact, EFT is a broad term that also includes wire transfers, point-of-sale transactions, telephone bill-pay plans, and even ATM transactions.
• eChecks: E-checks refer to a specific process of moving money electronically from one bank account to another. An e-check mimics the process of paying by paper check, just without the paper check. During the processing of an e-check, funds typically are transferred via an ACH transaction. In other words, e-checks generally are a type of ACH transaction — but not all ACH transactions are e-checks.

Note: E-checks are an especially important form of payment for high-risk businesses that may not be able to use other payment methods. If you’d like to dig deeper into how e-checks work and learn how they can benefit your business, check out our complete e-check payment guide.

The Final Word On ACH Transaction Types

Whether you’re using ACH to credit or debit an account, ACH transactions provide a secure and low-cost method of moving money between accounts.

Looking to add ACH transaction support to your payment processes? We can help you compare ACH processors.