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ACH Transfers: Everything You Need To Know

ACH Transfers Explained: How Do They Work?
Rebecca Safier
Rebecca SafierUpdated July 27, 2023
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If you receive direct deposits from work, chances are you’re the recipient of ACH transfers. In fact, the majority of American workers (93%) receive their paychecks through the ACH network. But what is an ACH transfer, and how does the ACH network work? ACH stands for Automated Clearing House, which is a network governed by the National Automated Clearing House Association (Nacha).It allows people and businesses to easily and quickly send money directly from one bank account to another. 

What Is an ACH Transfer?

An ACH transfer involves electronically moving money between bank accounts through the Automated Clearing House network. It might involve direct deposits from an employer or government benefit program, for example. Bill payments and person-to-person payments through apps like Zelle, Venmo, and Paypal also use the ACH network. ACH transfers offer a reliable, secure, and relatively fast way to send and receive funds electronically from one bank account to another. 

Types of ACH Transfers

There are two main types of transfers on the ACH network: 
  • ACH credits: ACH credit transfers push money away from an account. This is the type of ACH transfer you’ll use to send money to a friend or family member. It also describes direct deposits, which are ACH credits from the requestor’s account, such as an employer or government benefit program’s account. 
  • ACH debits: ACH debit transfers occur when money is pulled from an account. If you set up automatic bill payments on your bank account, for instance, the company will debit money from your account each month via ACH debit transfers. 

What Are the Benefits of ACH Transfers?

ACH transfers have several benefits, including ease and convenience. It’s easier to transfer money electronically through the ACH network than to write and mail a paper check or drop it off in person. ACH transfers are also secure and quick. Sending and receiving ACH payments typically happens within one to two business days after the transaction is completed. In fact, Nacha requires that debits are settled the next business day after they’re initiated. Credit transfers must be settled in one to two business days. Finally, ACH transfers are usually free. It typically doesn’t cost you anything to set up automatic bill payments or send money to a friend through Venmo or Zelle. Keep in mind, though, that some third-party payment portals may charge fees for money transfers. 

What Are the Downsides of ACH Transfers?

While ACH transfers are convenient and usually free, they may come with some downsides. For instance, some banks set a limit on how many ACH transfers you can make within a week, month, or other time period. The rules may get confusing, as some types of ACH bank transfers may be free and unlimited whereas others may come with a fee or transaction limits. For instance, some banks adhere strictly to Regulation D, which allows banks to charge a fee if you make more than six of certain types of transfers or withdrawals within a month. Recommended: Guide to Savings Account Withdrawal LimitsAnother downside is that some banks may not let you make ACH transfers to certain destinations. For instance, you may or may not have the option of transferring money via the ACH network to an international bank account. What’s more, it’s possible that your ACH transfer could be delayed if you initiate it later in the day or make a typo when entering the transfer information. ACH transfers aren’t usually instant, which could be another drawback if you need to transfer money immediately. 

How Long Do ACH Transfers Take?

ACH transfers aren’t usually instant. Delivery of funds to a bank account via ACH can take a few days, depending on the timing of the request.As mentioned, Nacha’s operating rules dictate that a debit transfer must be made the next business day and credit transfers must be made within one to two business days. Note that the transfers happen on business days, though — so you might have to wait several days if an ACH transfer is initiated right before a weekend or holiday. Also, your bank or credit union may not instantly deliver the funds into your account once it receives them via ACH transfer. Your financial institution may take some time to transfer the funds, so it could actually take three to four days for you to get them. If you need the money faster, some banks can expedite the payment for a fee. That said, some banks are able to process payments the same day they’re sent — it all depends on the bank. According to Nacha, 603.8 million same-day ACH transfers were made in 2021, an increase of 73.9% from the previous year. With the rise of fintech and instant payments through apps like Venmo, some banks are able to speed up their money transfer processes.  However, in general, expect an ACH transfer to take anywhere from one to four business days. 

What Does an ACH Transfer Cost?

ACH bank transfers are usually free, but it’s always a good idea to check your bank’s fine print. For example, some banks charge a fee of around $3 to transfer money to an external bank account. Peer-to-peer apps may charge a processing fee of around 3% if you pay with a credit card. You might also incur a fee if you request expedited payments. Overall, though, you can expect ACH transfers to internal bank accounts, bill payments, and direct deposits to occur free of charge. 

What Are the Differences Between a Wire and ACH Transfer?

ACH and wire transfers both allow you to send money electronically, but they have some key differences. First off, wire transfers are usually faster, often taking just a few minutes or hours to complete. Wire transfers usually have fewer limitations around where the money is going, too, so they’re often a better option for international transfers. Because they deliver money quickly, a wire transfer may also be a good choice for a transfer that’s time sensitive or involves a large sum of money. There are a few potential downsides to wire transfers, though. For one, they usually come with a fee of $20 to $30 per transaction. You may also have to pay a fee for receiving a wire transfer. Wire transfers are often irreversible. Once the money has been transferred, you don’t have much recourse to get it back. Always be certain you trust the recipient before wiring money to them. With ACH transfers, on the other hand, you have more options when it comes to canceling or reversing a transfer of funds. Recommended: Wire Transfer vs Bank Transfer: What’s the Difference?

The Takeaway

ACH transfers offer a convenient, secure, and often free way to transfer money from one account to another. If you receive direct deposits from an employer or benefits program, chances are you’re already the recipient of money transferred through the ACH network. Automatic bill payments usually also use ACH transfers to debit money from your account and pay your service providers. It’s always worth checking with your bank to make sure you’re not paying any unnecessary fees for transactions. If you’re dissatisfied with your bank’s fees or other rules, Lantern can help you compare savings accounts that earn a high interest rate.Explore high-yield savings accounts with Lantern by SoFi today!

Frequently Asked Questions

How long does an ACH transfer take?
What is needed for an ACH transfer?
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About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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