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Updated on Tuesday, September 1, 2020
You may have come across the term ACH when looking at different banking options or making certain banking transactions.
ACH stands for Automated Clearing House, which is a network and processing system that financial institutions use to transmit funds electronically between banks and credit unions. ACH transfers help to cut down on costs and processing times.
ACH transfers can include depositing funds directly to your account (transfers in, or credits to you), or transferring money out of your account to make payments (debits to you). For example, when your employer deposits your paycheck to your bank instead of handing you a paper check, that is an ACH transfer. Other direct deposits made by ACH transfer can include income tax refunds or other types of refunds. ACH direct payments (transfers out) often are used when you pay credit card or retailers’ bills (either one-off or recurring).
How long does it take for an ACH transfer to process?
ACH debit and credit transactions tend to process pretty fast. The National Automated Clearing House Association (NACHA) has operating rules that specifically require ACH credits — when you receive money — to settle within one-to-two business days. ACH debits — when you pay money — will settle the next business day. In most cases, all ACH transfers are settled within the same business day. But that doesn’t mean that money will land in your bank account that quickly. It could take as long as a few days, depending on your bank or credit union’s rules and regulations.
ACH money transfers — rules and fine print
Most financial institutions don’t charge a fee for incoming or outgoing ACH transfers. However, you are limited to six withdrawals per month for a savings account based on the Regulation D rule. So, if you go over that limit, your bank or credit union may charge you what’s known as an excess transaction fee.
Another fee you may encounter is a non-sufficient funds (NSF) fee — when you don’t have enough funds to cover the amount you’re transferring. Whether this fee is charged at all, and its amount, depends on the financial institution, so it’s best to check with yours.
Also depending on the financial institution, the limits on transfer amounts will differ. NACHA imposes a $25,000 daily limit on individual transactions. In other words, if you make multiple transactions, each one is limited to $25,000 in a single day. If you go over that amount, then your transfer will be processed the next day.
Wire transfers vs. ACH transfers
Both wire and an ACH transfers involve one financial institution sending funds to another one. Although both are electronic transfers, wire transfers use a different network, called Fedwire, and can involve transfers within the U.S. or internationally. Wire transfers are sent directly from one physical place to another, whereas ACH transfers are sent through a network.
In addition to making a wire transfer at a bank, you may make it at a nonbank provider — companies specifically designed to help you send money domestically or abroad. These companies may not require you to give your bank information. Instead you’ll need the receiver’s name, your personal details and the cash upfront that you intend to send. With an ACH transfer, on the other hand, don’t have this option.
Free and fast ways to transfer money
ACH transfers aren’t the only way to send or receive money. There are many other options that allow you to get almost instant access to funds with no fees involved. Two of these are cited below.
Zelle is a peer-to-peer payment service where users can receive, send or request money to and from other bank accounts by using either an email address or phone number. This works even if the sender and receiver use different banks. Zelle claims that it can send money within minutes for no fee.
Many banks already offer Zelle via their existing online platform or mobile banking app. So, you may access it that way. However, if your bank does not have Zelle embedded in its system, then you may download Zelle’s own mobile app, create an account and use it to send and receive money.
Similar to Zelle, Popmoney is is a payment service that may be available at your bank (via their mobile or online banking services) for free. All you need is the recipient’s email address or phone number and you can send money. If you decide to use the service via PopMoney’s website, you’ll be charged $0.95 per transaction. There is also a monthly limit of $5,000 if transfering from a bank account and $1,000 if doing so with a debit card. If you’re using PopMoney via your financial institution, you’ll need to check with them to see what their limits are.
Tips for sending money safely
When sending money online, you want to be sure that you’re sending the money to the right person and that your own personal details are protected. Sounds obvious, but for example, double check your Wi-Fi connection to make sure that it’s secured. Of course you don’t want hackers to steal your sensitive information.
You’ll also want to ensure that you are sending money to a reputable place. NACHA created a booklet to help consumers spot scams and fraudulent behavior, such as merchant impersonations — that is, when someone pretends to be a company and states that you owe money on a purchase or a bill.
If you find fraudulent activity in your account, notify your bank as soon as possible. Sometimes you can reverse your ACH transfer if you accidentally sent the wrong amount or you suspect that there’s been an error.