What Are ACH Payments?


What are ACH payments?

The Guide to ACH Payments & Transfers

As a business owner, your main goal is to grow your business. This means you need to have healthy profits and sales. These two factors will help you to improve your products and services, and increase your marketing efforts to stay ahead of your competitors. The bonus of having more money in your bank account at the end is also a welcome benefit.

A key factor in increasing sales and profits is to evaluate the payment methods you are receiving. While it is true that customers will accept more payment options, you can increase your sales potential. However, there are other factors to consider. Customers appreciate a simple purchasing process. The more it is made, the more they will buy. For example, recurring payments can be a powerful driver of ongoing buying that leads to more sales. You can also increase your overall profits by choosing payment options that are low-cost per transaction.

The world of ACH payments is yours. This payment option is powerful and offers many benefits, including increased sales and better profits. This article is your complete guide to ACH payments. We will discuss what they are and how they work. Finally, we will show you why they are worth including in your payment processing options.

What are ACH Payments and ACH Transfers?

DFN: An ACH is an electronic network that processes payments between banks. It can support credit transfers as well as direct debits. __S.17__

Nacha, the organization that manages ACH (based on its original acronym NACHA – National Automated Clearing House Association), is responsible for its management. It is a nonpartisan government agency that regulates the ACH network. They also provide guidelines for participants to help ensure a strong framework and protect against fraud.

Automated Clearing House is only available to US banks. It is not part the Canadian payment industry, and it cannot be used to make international transfers.

Although the payment method is known since the 1970s it has seen significant growth in recent years. It is well-known for its reliability in receiving and providing funds safely and securely, as well as being low-cost compared to other payment methods. It has made it more accessible by improving its internal processes and expanding its participation. It is now a popular alternative for credit card payments and paper checks.

In 2020, ACH moved $61 trillion worth of funds. This is an 11% increase on the previous year. This amounts to 2 billion online transfers, an increase of 15% over the year before.


ACH is very popular due to its wide variety of benefits. In fact, it’s likely that you have enrolled in it in your private life. ACH can be used for ongoing payment by most major recurring services. It can be used to pay bills at your local utility, phone company or electric company or to make mortgage payments or car payments. It can also be used to receive money. Direct deposit payments can be used as a type of ACH transaction.


ACH can be trusted by both local and state governments, as well as the federal government. It is used frequently to pay taxes, provide social security checks and provide benefits.

Terms “ACH Payments” and “ACH Transfers”

When researching ACH, you will often encounter the terms ACH Payment or ACH Transfers. Both terms can be interchanged and describe the process of moving money through ACH.

There are two types of ACH payments/transfers:

  • Direct deposits are transactions that customers or businesses make to their customers.
  • Direct payments are transactions between customers and businesses or government departments.

This article will discuss Direct Payments – how customers use ACH to move payments from their customers to their business.

How does ACH payments work? Understanding ACH Transactions.

The ACH network links banks electronically to facilitate bank-to-bank transfers. These transactions can be either person-to–person, business-to–business, or a combination of both.

This works in a different way than credit card transactions and services such as PayPal and Venmo because there are no third parties involved with the money handling. This makes it safer and lowers the transaction fee.

Through ACH, money can be “pushed” to your account by your customer from his/her bank or “pulled” from your account by your bank from your customer’s account.

H3 – How Transfers Happen: Steps to Automatic Withdrawal From Accounts

You will most likely “pull” money out of customer bank accounts. Let’s now take a closer look at the process for electronic withdrawals from customer accounts. Bank money transfers are similar to wire transfers. The following example will show how customer transfers are made on a monthly basis.

  1. Your bank’s internal ACH software will instruct your bank each month to contact every customer asking for funds. Your bank becomes the Originating Depository Financial Institution, (ODFI) at this point.
  2. The request is received by the customer’s bank. They verify the account details and check if the customer has enough funds to pay the funds. The Receiving Depository Financial Institution is the customer’s bank.
  3. After funds have been verified, the bank initiates electronic transfers between accounts.
  4. Your bank and your customer’s bank will communicate with each other, verifying that the funds transfer is authentic and making sure that it doesn’t exceed each bank’s monthly or individual transfer limit. All is well, funds are transferred to your account.
  5. Your bank might hold funds to verify the transaction in certain cases. The average time it takes to transfer funds from bank to bank is 3-5 days. However, in some cases, it may take even less time. This is discussed in detail in the Timing for ACH Transactions section.

As long as the bank has Nacha, there is no restriction to the types of accounts ACH can access. These accounts can include cash accounts, savings accounts and money market accounts.

The Benefits of ACH payments

ACH payments can bring benefits to both you and your customer. These are the top benefits:

No processing fees. Customers who frequently transfer money between accounts have a significant advantage. You may have to pay a small fee or you can get the money for free. It all depends on the bank. It depends on the bank.

Transactions of dollar amounts exceeding $25,000. are typically charged between $0.29 to $0.75. Banks may charge a $3 transaction fee to cover operational and processing costs associated with ACH. It is cheaper than a bank wire transfer, check or credit card, but it does have a higher limit than credit cards and can be used to send money faster than checks. It is a great choice for large sums and sensitive transfers.

  • Notice: Some banks limit the number of transactions per month, such as six. A payment volume threshold may be set for each day, often $25,000 per day. Customers may be subject to a fee if they request same-day transactions or a penalty if there are insufficient funds.

Benefits of receiving regular payments: You can better budget and plan for your business’ growth by receiving payments more frequently. Stability is achieved through regular payments. This makes it easier to track your profits, growth, and plan your next steps.

Added security via direct payment: Since ACH electronically transfers money bank-to-bank over an encrypted network, payments are more secure than checks, credit cards, or wire transfers.

High retention. Customers find paying easy and minimally intrusive, which is why they often extend their subscriptions or pay more.

Less payment problems: Because payments are pre-verified, and move from bank to bank directly, there won’t be any need to deal with lower credit card balances or bounced checks.

Less work for your staff:ACH automatically generates invoices, receives payments, creates receipts and keeps records for your accounting. This saves valuable time and allows you to focus more on your growth initiatives.

Avoid expensive late fees by paying customers less late payments You also get your payments when you need them, without spending time chasing customers.

Increased payment options You can create payment plans that run weekly, monthly, or at whatever frequency works best for both you and your customer. Customers may also find partial payments a powerful incentive, which can result in increased sales.

Better customer relations: Customers receive automatic notifications when payments aren’t processed. They can then correct the problem themselves without having to contact your customer. This prevents customers and staff from having awkward conversations that could negatively impact future business.

What is an ACH Credit Transaction?

ACH debit is a term that you’ll most likely encounter when learning about ACH.

ACH credit transactions (from the customer to yourself) are financial transactions that move money from the payer to the payee. This is the movement of money. Funds are “pushed” from the customer’s bank to yours, with approval from the customer who initially signed up for ACH.

This is often used by businesses to deposit their payroll. An ACH Credit can be used by a customer for a one-time payment or to establish ACH connections with two banks.

Nacha states that credit institutions have the choice of processing and delivering ACH credit within one day or after one to two days.

What is an ACH Debit Transaction, and how do I use it?

ACH Debit transactions allow you (the payer) to transfer the funds. This is where the money is “pulled”, or transferred, from the customer’s account to your account.

Your customer approves this form of authorization and it is done at the frequency specified in the enrollment form. This authorization can be either a one-time or recurring debit transfer. Once you have received the approval, you can start recurring payments without the customer having to do the work of pushing them.

The most popular type of payment is an ACH debit payment. Personal accounts can be approved by you to allow a company to withdraw money each month from your account. You don’t even have to do anything. To receive payments from customers, you can set up ACH debits as a business.

Nacha demands that ACH debit transactions are processed by financial institutions within the next business day.

What information is required for an ACH payment?

Fill out the ACH form to authorize ACH payments for your customer. BNG Payments is a merchant service provider and offers simple and intuitive forms and ACH software. These forms can be accessed by your customer via your website, email or printed form.

To link accounts, the form needs correct bank information, including the customer’s routing numbers, account numbers, and any other personal details such as email address, phone number, or home address.

The customer must also confirm in writing the frequency of transactions as well as the amounts being transferred. Final approval for bank payments is given by the customer with his signature and acceptance of the terms and conditions.

Processing Time for ACH Transactions

Although electronic, digital transfers are faster than traditional methods, they do not always pay immediately. The entire ACH transfer process usually takes between 2-4 days. This timing gives it an advantage over other types of payments like check payments and credit card payments. In some cases, cash payments can also be made. It’s not easy to drive back and forth from a bank every day.

Bank hours are the main reason why there is a delay of 2-4 days. Here are the reasons.

Batch Timing

The funds are not sent automatically from the customer’s bank into your bank. Along with any other electronic transfers orders, the order is sent at a specific time of day. A “batch” is a group of transfers. Typically, three batches are sent by banks each business day.

The batches can be sent or received during normal bank hours. The bank can choose which batch to use for customer transactions. Therefore, the time at which the batch is sent may delay final transfer by up to one business day. If funds are received by your bank outside of business hours, they will arrive one day later.

Hours of Operation for Both Banks

All requests for funds transfer and fulfillments are made by both your bank and the customer’s banks during normal business hours. Because bank hours and locations can vary, and most banks are closed on weekends and holidays, it may take up to four days to complete fund transfers and move payments.

To speed things up in some cases, Same Day ACH Payments may be available. It offers same-day funds transfer, although not always, as the name suggests. This is where bank hours play a major role. If you request a same-day transaction from your bank and it is past the close of your bank’s workday, your request will not be processed by your bank until the following business day. The bank will not be able to process your request if it is received after hours on Thursday. This process can take longer if the bank is closed on weekends or if you request it on Friday night. In that case, it won’t be able to process it until Monday morning. It will take longer if there are bank holidays.

You should also consider the bank’s timing. The same restrictions on working hours apply which can also affect the timing. You might find that your customer’s bank is closed at the time you request it. Or, the last batch of the day has been sent. This could delay the transfer until the next day.

How to get ACH payment capability

Nacha demands that all parties involved in ACH follow certain rules and procedures to protect customer information. One rule says that bank information must be transmitted encrypted. This applies to any routing number or bank account number. You will need to follow specific internal procedures for data storage and use “commercially reasonable technology”.

Merchant service providers are often able to offer the technology. You can trust your merchant account provider to ensure safe and proper setup due to the many rules and possible liability for data breaches.

BNG Payments Can Help

BNG Payments offers ACH capability regularly and takes the hassle out of being fully compliant. We can provide the necessary software and systems to protect your customer data, and we can even install it on your existing framework.

We have learned that ACH payments offer customers greater flexibility and increased flexibility over the years. This payment method allows for increased sales and more certainty for business owners. It also provides pre-verified payments that give owners greater control over their finances.

Our back-end systems manage all phases and repeat business. This reduces billing time for your staff and makes it easy for customers to sign up on any device. Combined with this technology’s lower cost-per-transaction, your business stands to benefit significantly.

BNG Payments is here to help you grow your business. This is only one way we do this. Contact us to learn more.


BNG Payments

3285 47th St S, Fargo, ND 58104







Steven Gregory