Banking

What is ACH Transfer?

An ACH transfer moves money electronically between banks in the U.S. It’s commonly used for direct deposits, bill payments, and peer-to-peer transfers. Governed by Nacha and overseen by the Federal Reserve, the ACH network processes direct deposits, consumer bill payments, and business-to-business transactions. ACH transfers typically settle within one to three business days, though same-day ACH options are increasingly available for expedited processing.

ACH transactions are categorized as either direct deposits (credit transfers initiated by the payer) or direct payments (debit transfers initiated by the payee). They represent the vast majority of consumer electronic bank transfers due to their low transaction costs.

Quick Facts

Governing NetworkNacha (National Automated Clearing House Association)

Settlement Timeline1 to 3 business days (with Same-Day ACH options)

Transaction TypesACH Credits (Payroll) and ACH Debits (Bill Pay)

Processing MethodBatch transactions processed at scheduled intervals

PRACTICAL EXAMPLE

An individual schedules their auto insurance premium payment of $120. The insurance company initiates an ACH debit on the due date. The funds are cleared and debited from the customer's checking account the following business day.

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Learn More Key Concepts

Wire TransferAn immediate electronic transfer of funds between financial institutions, typically executed via the Fedwire network.

Direct DepositThe electronic transfer of a payment directly into a recipient's bank account, bypassing paper checks.

Routing NumberA nine-digit code identifying a specific financial institution in U.S. electronic payment and clearing networks.

Checking AccountA highly liquid transactional deposit account held at a bank, allowing for frequent deposits and immediate withdrawals.

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