What is ACH?
ACH (Automated Clearing House) is a replacement for paper checks. Essentially ACH electronically transfers money between US bank accounts. This transfer is done through the ACH network which means credit and debit cards are not involved in the transaction. Have you paid bills online or gotten your pay through direct deposit? Or even send money via Venmo or PayPal? Those are all ACH transfers!
ACH is a clearing system between banks. Essentially, if you have a bank account with Wells Fargo and you make an ACH Payment with someone that has a Bank of America bank account, these two banks make transactions with each other. They do this by crediting and debiting each other’s accounts. During the day, each bank keeps track of the owed amounts. At the end of the day, each bank process the totals automatically.
The National Automated Clearing House Association (Nacha) manages the development, administration, and governance of the ACH network. Nacha released the statistics for 2020 that stated online transactions were up 15.2% from 2019. This increase was a record high predominantly due to the Covid-19 pandemic. Experts say this trend won’t default to the numbers before the pandemic, ACH is here to stay.
Why ACH? There are many benefits when it comes to ACH transfers. The top being of convenience. Without writing a check, adding a stamp, and mailing out your money, you can transfer funds electronically within a few minutes in the palm of your hands. ACH transfers are also at no cost to you and typically process within 1-3 days. Compared to wire transfers that cost on average $25-$30 per transfer and process within 24 hours.