If you’ve ever used Direct Deposit to receive a paycheck, odds are you have used an ACH transfer.
Automated Clearing House, or ACH, is a trusted method of transferring funds directly between two financial institutions. Sometimes it is known as EFT or Electronic Funds Transfer.
This network of banks is self-governed by the National Automated Clearing House Association, known as Nacha for short.
Nacha is a non-profit organization funded by the financial institutions that use the network. It defines the rules and business practices that govern the network and they are updated regularly.
Although Nacha is not a government entity, they do work closely with the Federal Reserve, US Treasury and other entities to ensure the integrity of the system is maintained.
Everyone! Nacha claims that over $62T was moved over the ACH network in 2020.
The Federal Government recently offered ACH as a method for delivering stimulus and child tax credit payments. ACH can be utilized for transactions by:
ACH transfers are an attractive option for all involved because they are secure, easy, and the transfers happen quickly with some transactions settling the same day. In the past, this was only achievable by a wire transfer which can have a steep price tag.
Depending on the banking institution and the account, an ACH transfer often comes at no cost to the consumer. Users can also send payments automatically on a recurring basis, eliminating the need to remember to make monthly payments. There’s no hassle of remembering to write a check and gone are the days of the check getting lost in the mail.
Nacha and the banking institutions determine the limitations of the network.
Some banking institutions may limit the number of ACH transactions that can be done in a time period or the amounts able to be transferred. Also, although the network has become increasingly fast, there can still be delays depending on when funds are sent so it is wise to be aware of that when sending payments.
Wire fraud has been a common concern for some time but ACH scams are on the rise as well. Be aware that providing account numbers to receive funds can open a gateway to withdraw funds as well so only give your information to trusted parties.
Overall, ACH is an easy, quick, and secure option to transfer funds between bank accounts.
It is a more attractive option than costlier methods like a wire transfer or more tedious and insecure methods like mailing a check.
Nacha and its members continue to evolve the network to optimize its function. It should only continue to grow in the future as more and more entities adopt its use.
Still have questions? Our experts are happy to answer any questions you may have regarding ACH transfers or other methods of payment.
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