What Is An ACH Payment & How Does It Work?

ACH payments are electronic bank-to-bank transfers processed through the Automated Clearing House network. In this guide, we’ll explore all things ACH to help you decide if your small business should accept ACH payments.

For specific vendor recommendations that offer ACH processing, check out our article on the best ACH payment processors for small businesses.

What Is An ACH Payment?

ACH payments are electronic bank-to-bank transfers processed through the Automated Clearing House network. For most businesses, ACH is a cost-effective and reliable way to send or receive payments.

The ACH network connects nearly all US banks and credit unions, allowing funds to move between eligible accounts.

Who Can Use ACH Transfers?

Most businesses with a US bank account can send or receive ACH payments through a bank, payment processor, payroll provider, or accounting platform.

Businesses that already accept card payments should check whether their processor also supports ACH payments.

How Does ACH Work?

ACH payments can be sent as either credits or debits:

• ACH credit: The payer sends money to another account.
• ACH debit: The receiver withdraws an authorized payment from the payer’s account.

Once initiated, most ACH transactions follow four basic steps:

1. The payment is authorized. The payer provides the required bank information and authorizes the transaction. Businesses collecting ACH debits must retain proof of authorization.
2. The originating bank submits the payment. The business, bank, or payment provider sends the transaction to an originating depository financial institution, or ODFI, which submits it to an ACH operator.
3. The ACH operator routes the payment. The Federal Reserve or The Clearing House sorts the transaction and sends it to the appropriate receiving depository financial institution, or RDFI.
4. The receiving bank posts the transaction. The RDFI credits or debits the appropriate account. ACH debits may be returned for reasons such as insufficient funds, incorrect account information, or missing authorization.

How Long Do ACH Payments Take & When Do ACH Payments Post?

ACH payments may settle on the same business day or within one to two business days. However, your bank or payment processor may take additional time to make the funds available. Most ACH payments settle within one business day or less.

Do ACH Payments Post On Weekends?

ACH payments do not settle on weekends or federal banking holidays. Payments submitted after your provider’s cutoff time may not begin processing until the next business day.

What Are ACH Batch Times?

ACH payments are processed in batches throughout each business day. The network currently operates for more than 23 hours per business day and provides four daily settlement opportunities.

Your bank or processor may use earlier submission deadlines.

Do Banks Hold ACH Payments?

Even after an ACH payment settles, a bank or processor may delay access to the funds while reviewing the transaction or managing return risk. Check your provider’s payout schedule for its specific availability timeline.

Is Same-Day ACH Processing Available?

Same-day ACH allows eligible payments to settle within the same business day. Availability and fees depend on your bank or processor.

The current same-day ACH limit is $1 million per payment. Payments above that amount are generally processed for next-day settlement instead.

The Bottom Line On ACH Payments

ACH payments offer businesses a secure and cost-effective way to send and receive money directly between bank accounts.

While ACH payments are not instant and can still be returned or disputed, they may help businesses reduce processing costs and simplify recurring payments.

Ready to get started with ACH payments? Check out our complete guide to learn how to accept ACH payments.

ACH Payment FAQs