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What is an ACH payments?

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An ACH payment (Automated Clearing House) is an electronic payment made from one bank to another. It operates silently behind the scenes, facilitating the movement of trillions of dollars between bank accounts each year. Here are some key points about ACH payments:

Consumer Use: Individuals benefit from ACH when they use services like online bill payment or receive direct deposits (such as paychecks) into their checking accounts.

  • Business Transactions: Businesses can also leverage the ACH network to:
    • Receive payments from customers.
    • Send payments to vendors.
    • Transfer money between accounts at different banks.
  • Processing Times: The ACH network is available to process payments for approximately 23 hours every business day and payments will settle on average four times a day. ACH payments can be credited the same day, the next day, or within two days for speedy processing.
  • Categories of Transactions:
    • Direct Payment: Make or receive payments to businesses or consumers. Examples include paying credit card bills, donating to campaigns, or using mobile payment services.
    • Direct Deposit: Make payments from businesses or government agencies to consumers. Employers use direct deposit, and it’s also used for disbursing Social Security benefits and federal tax refunds.
  • Processing Entities: All ACH payments are routed and processed by either the U.S. Federal Reserve or the Clearing House Payments Company which is a private business owned by 24 major commercial banks. The Clearing House’s ACH payments service called the Electronic Payments Network, handles approximately half of all U.S. commercial ACH payment.

ACH is a payments system organized and administered by Nacha (formerly the National Automated Clearing House Association). It was founded in 1974 to enhance the U.S. payments system.

In summary, ACH payments enable seamless electronic transfers of money between bank accounts, benefiting both individuals and businesses.

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