ACH stands for Automated Clearing House. An ACH Transaction is a system used by banks to transfer money between accounts held within the same bank or through a different financial institution. ACH Transactions actually have nothing to do with card transactions, but they are processed in much the same way using similar technology and they follow many of the same rules.

What is ACH Credit?

An ACH credit is a term sometimes used to describe a payment that has been received, but not yet processed for deposit into the seller’s bank account. It can also refer to an electronic funds transfer initiated by a debit request at a point of sale terminal. The ACH credit refers to the debiting of the buyer’s bank account.

Many businesses use a third-party billing company to process their credit card transactions, and that company is going to need a copy of the invoice before they can “capture” or take ownership of those funds from your bank account. In the meantime, it is helpful if you understand what ACH credits are and how they work.

What is ACH Debit?

An ACH debit, as you have probably guessed, occurs when your bank account has been debited for a payment that has been received from a customer or client. The ACH debit can also refer to an electronic funds transfer initiated by a credit request at a point of sale terminal. The ACH debit refers to the crediting of the seller’s bank account.

ACH credits and debits use a process called “substitute check” which means that the payment is processed as if it were a paper check, but instead of being printed and mailed, it is created electronically. This has several advantages over the payment by check.

First, although it is an electronic process, the substitute check is more secure than traditional paper checks because it uses your account and routing numbers. You are still responsible for any loss you may suffer as a result of someone else knowing your checking account number and routing number.

ACH credits provide another level of security because the transfer of funds actually occurs between your bank and the buyer’s bank. This is also one reason why some merchants prefer ACH transactions to card transactions – because it gives them access to a wider customer base through direct deposits, instead of just on-line purchases.

Many businesses use a third-party billing company to process their credit card transactions, and that company is going to need a copy of the invoice before they can “capture” or take ownership of those funds from your bank account. In the meantime, it is helpful if you understand what ACH credits are and how they work.

ACH Transfer Limits

The limits for an ACH transfer normally depend on the size of the transaction, see below.

ACH Transfer Time

Standard ACH transfer is completed within 3+ days. First, the electronic entry gets routed to a U.S. Payments Association FedLine terminal operator who then sends it via batch processing to your bank for deposit into your account. The next day you can collect funds at your bank and the following day it appears as a credit on your account.

ACH Transfers sent to or from foreign banks may take up to 4 days, but this is rare. Most of the time it takes about 2 business days for funds to be deposited into your account. This is because the electronic transfer has to first go through an intermediary bank before it reaches your own. Since the intermediary has to perform currency conversion, you should allow up to 4 business days for this process.

ACH Transfers sent via FedLine direct are not subject to any maximum or minimum dollar limits and can typically be completed in less than 1 day. Note that routing transit times vary according to payment type and may take longer during the holiday and end-of-quarter periods.

ACH Transfers to or from a foreign country typically take an additional 3 days, but this is also rare. Please note that it is down to your bank’s discretion whether ACH credits will automatically post back into your account each day until they arrive at their destination.