What Is an ACH Transfer? How It Works

ACH transfers are electronic money transfers sent from one bank to another across an Automated Clearing House (ACH) Network—a digital hub that transfers funds. Banks, credit unions, and other institutions use the network to bundle direct deposits or payments and send them at specific times of the day. It’s a convenient way to send and receive money quickly and securely.

Types of ACH Transfers

The two main types of ACH transfers are credits and debits. With an ACH credit you receive money, and with ACH debits you send money. Here’s what else you need to know. 

ACH Credits

To have money deposited into your account, you need to provide the sender with your bank details, including your bank name, routing number, and account number. Sometimes, senders ask for a void check to verify your account information. 

Beyond that, there’s nothing you need to do to receive the money. Once the ACH payment is sent and processed, it just shows up in your account. You can see who sent the money and the amount on your transactions list or statement. The transaction will show as a credit. 

ACH credits are popular for receiving:

• Direct deposits for employee paychecks, commissions, and bonuses
• Employee travel and employee reimbursements
• Tax and other refunds
• Money from payment apps, like Zelle and Venmo
• Government benefits, like Social Security and unemployment 

ACH Debits

When making ACH direct payments, you typically need the recipient’s bank account and routing number, account type (checking or savings), and whether it’s an individual or business account. You then input the information into the payment platform, such as from your bank’s online customer portal, payroll platform, or social payment app like Zelle or Venmo. Once you send the money, it’ll appear in your account as a debit, showing who you sent it to and the amount. 

Pros and Cons of ACH Transfers

Pros Explained

• Convenient to send and receive: ACH is easier and more convenient for most people than writing and mailing checks to friends or service providers. Receiving is also simpler because you don’t have to deposit the check.
• Secure way to move money: ACH transfers won’t get lost or stolen in the mail. Money is sent directly from the bank to your account, protecting your sensitive personal information from being seen. 
• Quick transfers: Same-day ACH can send money as fast as a few hours. For payday deposits, you’ll usually see the money in your account by 9 a.m.
• Little to no fees: The median cost of initiating an ACH transfer for businesses is $0.26 to $0.50. Services like online bill pay and sending peer-to-peer (P2P) payments on apps like Zelle and Paypal are usually free for standard transfers, as are receiving ACH payments. 

Cons Explained

• Transfer limits: Same-day ACH payments have a $1 million limit. Your bank likely has lower limits, but they are still high enough for most transactions. For example, Citibank’s limits are up to $25,000 to send and $100,000 to receive. Some P2P payment apps, like Zelle, can have limits as low as $500, depending on your bank and whether you recently enrolled.
• Slow processing: Same-day ACH transfers are usually processed in a few hours, but standard ACH payments can take one to two business days. Natcha says that 80% of ACH payments settle in one banking day.
• Can be reversed: Unlike wire transfers, unauthorized, mistaken, or fraudulent transfers can be reversed. While this is good for consumers, it makes ACH transactions riskier for business owners who accept them as payment. 

Other Ways to Send Money Online

Wire and cryptocurrency transfers are just a few other ways to send money online. International and domestic wire transfers are direct bank-to-bank transfers that bypass the ACH network. Cryptocurrency transfers move Bitcoin, Ethereum, and other cryptocurrencies via blockchain. 

If you need to pay someone without an ACH transfer, you could also use:

• Credit card money transfers: Platforms like PayPal and Western Union allow you to pay someone using a credit card instead of an ACH or bank account. 
• Card-based P2P payment apps: Use your Venmo or Cash App balance or a debit card to send money directly from your card or app account to another account in the same app.
• Instant debit card transfers: Apps like Venmo allow you to transfer money within 30 minutes from your app account balance to your participating banks and debit cards.
• Online money transfer services: Some services can send money online without ACH. Instead, they use debit and credit cards or wire transfers. 

The Bottom Line

ACH transfers are a secure, reliable, and affordable way to send and receive money between bank accounts. They’re ideal for payroll, bill payments, and even P2P payments. However, you might bump up against the transfer limit and some transactions have the potential to be reversed. If you need faster or alternative options, wire transfers, cryptocurrency, and card-based payment apps can help you send money outside the ACH Network.