ACH

ACH (Automated Clearing House)

ACH stands for Automated Clearing House, which is an electronic network used to move money between bank accounts in the United States. It is operated by Nacha (formerly the National Automated Clearing House Association) and typically serves as the backbone for many everyday financial transactions, including direct deposits, bill payments, and person-to-person transfers.

ACH transfers generally move money in batches, meaning transactions are collected and processed together at scheduled intervals rather than instantly. Most standard ACH transfers take one to three business days to complete, though same-day ACH options are now available in many cases for an additional fee. Because ACH payments move electronically, they are generally less expensive to process than paper checks or wire transfers.

Why it matters

ACH is one of the most common ways consumers interact with their bank accounts, often without realizing it. When your employer deposits your paycheck directly into your account, that is typically an ACH credit transaction. When you set up automatic monthly payments for a utility bill or loan, those are generally ACH debit transactions, where a company pulls funds directly from your account on a scheduled date.

Understanding ACH can help you manage your account balance and avoid overdrafts. Because ACH debits typically post on specific dates, knowing when payments will clear allows you to make sure sufficient funds are available in your account ahead of time.

Example

Suppose you set up automatic payments with your internet provider. Each month, on the 15th, the provider submits an ACH debit request to your bank for your bill amount. Your bank receives the request, verifies that the funds are available, and transfers the money to the provider’s bank account. In most cases, the payment posts to your account within one to two business days of the request being submitted, and you can see the transaction in your account history labeled with the provider’s name.

Related terms

• Direct deposit: An ACH credit transaction used by employers and government agencies to send funds directly into a recipient’s bank account.
• Wire transfer: A separate electronic payment method that is typically faster than ACH but generally costs more to send.
• Electronic funds transfer (EFT): A broad term covering any movement of money between accounts through electronic means, including ACH transactions.
• Nacha: The organization that sets the rules and standards governing the ACH network in the United States.
• Routing number: A nine-digit number that identifies a bank or credit union and is required to initiate an ACH transaction.