ACH payments are bank-to-bank payments made electronically. ACH refers to Automated Clearing House. Organizations and individuals can both use this system to make online ACH payments directly as an alternative to relying on checks, wire transfers, cash, card payments, or payment apps. Payments are generally made within the US, although international money transfers are possible.
Payment Categories
ACH transactions are made up of two main categories. These are direct payments and direct deposits. In the case of a direct payment, funds are transferred to make or receive a payment. For example, this could include setting up a direct payment to pay a bill each month, making a direct bank transfer of money to family or friends, or making a purchase. Direct deposit, on the other hand, refers to payments that are transferred to consumer bank accounts in the form of wages, benefits, tax refunds, etc.
ACH Debits
An ACH debit is a payment that is made from a consumer account to another account. This is set up with the consent of the customer, who allows the organization to collect the payment directly from their account. For example, you may give your permission for a business to do this if you set up a monthly automated payment for your energy bills or insurance payments. For businesses, security is paramount when setting up these payments. Yodlee offers a range of solutions for businesses to process ACH payments faster and safer. It provides ACH payments processing solutions that not only allow companies to save time and money but also keep consumer data more secure.
ACH Credits
ACH credits are payments made into rather than taken out of an account. In this case, the person who is making the payment is responsible for setting up the transfer of funds into the account. This could refer to the situation on the other side of the transaction when you are setting up a monthly direct payment for a bill. The business you are paying will receive an ACH credit payment that you have set up. Consumers may also receive ACH credits, for example, if a payment is refunded, or in the case of monthly payments that are made to them from their workplace or the government.
ACH Payments – The Details
While you can access same-day ACH payments, there is usually a higher cost involved. In most cases, you can expect an ACH transaction to take around three working days to be processed and paid, whether you are expecting a direct deposit or are making a direct payment from your account. There are several factors that impact the cost of accepting ACH transactions for businesses, including whether the business or organization is accessing the payments directly or via a third-party payment provider.
ACH payments are increasing in popularity and are a popular way to make and receive payments. Whether you are running a business or are a consumer, it is useful to know how they work and the different payment categories available.
