ACH (Automated Clearing House) is an electronic payment system used in the U.S. to transfer funds between banks. It's commonly used for direct deposits, bill payments, and business transactions.
Key ACH Terms
| Term | Definition |
|---|---|
| ACH | Automated Clearing House – the network that processes electronic payments. |
| Originator | The person or business sending the payment. |
| Receiver | The person or business receiving the payment. |
| Processing Time | Typically 3-5 business days due to batch processing. |
| NACHA | National Automated Clearing House Association – regulates ACH payments. |
| Settlement | The process of transferring funds from the Originator’s bank to the Receiver’s bank. |
| Returns & Rejections | Payments that fail due to incorrect details, insufficient funds, or fraud concerns. |
How ACH Payments Work
- Initiation – The Originator submits payment details to their bank.
- Processing – The bank sends the request to the ACH network.
- Settlement – Funds are transferred and credited to the Receiver’s account.
- Notification – Both parties may receive a confirmation.
ACH Processing Time
ACH payments are not instant. They usually take 3-5 business days, depending on:
- Timing – Payments submitted after 8:00 PM EST are processed the next business day.
- Weekends & Holidays – ACH transactions do not process on weekends or federal holidays.
- Returns & Rejections – Errors like incorrect account details or insufficient funds can delay processing.
Benefits of ACH Payments
✔ Lower Cost – Cheaper than credit card fees or wire transfers.
✔ Convenient – No need for paper checks or manual processing.
✔ Secure – Uses bank-level encryption and security protocols.
✔ Automated – Businesses can set up recurring payments for customers.
Security & Compliance
ACH transactions must follow NACHA regulations to prevent fraud and ensure security. Businesses must comply with authentication and data protection requirements.
Need Help?
If you have questions about ACH payments, contact us at docketpay@yourdocket.com.