What Is an ACH Transfer?


There are many options available for sending and receiving money these days. However, the days of mailing cash or even checks to cover our everyday expenses are long gone.

woman transferring money

After all, when was the last time you mailed a birthday card with actual bills in it? Alternatively, one of the most common ways to send money now is electronically through the ACH network. ACH stands for Automated Clearing House Network.

This technology underlies many payment types we use every day, such as PayPal when purchasing goods online or receiving government benefits like Social Security. You can also initiate ACH transfers to send and receive money through your bank or credit union.

Before you do, though, learn the details about everything this payment method entails. From timing to fees, ACH transfers take much more than a simple click of a button.

You also might wonder what the difference is between an ACH and a wire transfer. We’ll walk you through the pros and cons of each so you can figure out which is the best to use.

You’ll also learn restrictions on ACH transfers and how to keep your money safe during these transactions. An ACH transfer is a great way to send and receive money, but it’s helpful to know a few pertinent details before you get started.

What are ACH transfers?

Automated Clearing House (ACH) is responsible for electronically transferring funds between banks. In addition, many third parties like PayPal and government benefits such as Social Security use the ACH network. You may also be familiar with ACH payments such as automatic bill payments, direct deposits, and transfers between accounts.

Other transactions that can be processed through the ACH network, include direct debits, direct payments, eChecks, and electronic funds transfers (EFTs).

There are essentially two types of ACH transfers from a consumer’s perspective. The first is a debit transaction, which entails an external party withdrawing (or debiting) money from your account. Auto bill pay is a great example of an ACH debit transaction: the company you owe takes the money out of your account.

The other type is a credit transaction, which puts money into your account. The bi-weekly salary you receive from your employer via direct deposit is a prime example of a credit transaction.

How long do ACH transfers take?

ACH credit transactions usually take no longer than one to three business days to settle. However, with most financial institutions, the funds are available by the next business day.

ACH credits must be processed within one to two business days. These rules are set by the National Automated Clearing House Association (NACHA), the trade group that manages the network.

ACH debit transactions must be processed within a single business day. However, the receiving depository financial institution (RDFI) may institute a holding period. So, it could take up to a few days to finalize the ACH transfer.

However, new regulations are moving towards same-day delivery by requiring three network processing times each day, rather than just one. However, some banks and credit unions may charge an extra fee for this premium service.

Still, it will shorten funding times so that you can send and receive ACH transfers much more quickly than you could before.

What’s the difference between an ACH transfer and a wire transfer?

If an ACH transfer sounds a lot like a wire transfer, you’re right: they do share some similarities. However, there are also some stark differences to consider before choosing which one to use.

Most notable is the price difference. ACH transfers are usually free to receive and typically cost less than a dollar to send or could even be free (of course, always check with your bank for specific charges).


Wire transfers generally cost between $10 and $35 for domestic transfers and up to $50 for international transfers.


On the flip side, ACH payments take extra time to process, while wire transfers are speedy.

A wire in the United States, for example, can be received within hours and often even within minutes of the funds being sent.

International Transfers

International wire transfers may take a bit more time than domestic ones. But, you probably won’t be permitted to send ACH payments outside the country.

So if you need to send money abroad, a wire transfer is your best bet. Despite the additional cost, it’s still a fast and safe option to use for this purpose. ACH and wire transfers also differ in how they’re processed.

Time for Funds to Clear

With a wire, the funds are cleared before the money appears in the recipient’s account. The process isn’t entirely automated because a bank employee is needed to finalize the funding, but it’s still a quick process overall.

ACH transfers are handled in batches as they come in, which is why there’s a slower turnaround time. These two types of transfers differ significantly, so it’s important to analyze your priorities before picking which one to use.

ACH vs. Wire Transfer

Choosing between an ACH and a wire transfer comes down to two variables: cost versus speed. If you need to make a large, one-time transfer, especially if it must be done in a hurry, then a wire transfer is probably a good choice.

A common example would be making a down payment on a piece of real estate. A wire transfer provides quick funding that’s validated before being accepted, so the bank is assured that the transfer is fully complete.

Wire transfers are also ideal for international transactions. Whether you have family living abroad or a college-age student studying in a foreign country, a wire can get them the money they need quickly. Yes, a wire is pricier. But, you certainly get a lot of value for the speed of use if you’re in a time-sensitive situation.

But for regular, small transfers that aren’t incredibly time-sensitive, you can stick with ACH in most instances. Your employer could set up ACH direct deposits, which are free of charge to you.

It’s also generally free to sign up for automatic bill pay, whether through your bank or directly with each company you owe. ACH transfers are also easy (and usually free) when you need to transfer money to and from different bank accounts.

So if you have a high-yield savings account with one bank and a checking account with another, you can easily transfer funds between them. It may take a few days, but the process is simple. First, evaluate your needs for each transaction to figure out which one is best for you.

Restrictions on ACH Transfers

ACH transfers come with a few restrictions when you move money from your bank account. First, you may encounter daily or monthly limits to the amount you are allowed to transfer from each account.

If this might impact you regularly, you should check with your bank on their specific policy before relying on that account. Next, federal law limits the number of monthly transactions to six a month from savings accounts.

If you surpass this limit, you can be charged a fee, so keep track of your transfer habits for each account. You should also monitor the money in your account.

Insufficient Funds

If your funds are insufficient to cover the ACH payment amount, you risk incurring a fee from your bank and having the ACH transfer stopped. In addition, that could cause you to incur additional late fees if you’re trying to pay a bill.

Processing Times

Finally, pay attention to the timing of your ACH payments. Since they’re only processed three times per business day, you might miss the last one if you initiate the ACH transfer too late in the day.

On a Friday, the ACH payment will take until Monday morning to be processed. Then, you’ll have to wait for the receiving bank’s holding period.

Try to plan ahead as much as possible so you don’t run into any timing issues. Otherwise, you may have to spring for a wire transfer, and even those have time cut-offs each day.

What do you need to complete an ACH payment?

When you decide to send or receive an ACH payment, the process is fairly simple. To send one, you’ll need to provide the name of the bank you’re sending money to, the relevant account number, and the ABA routing number.

You can find the account number and routing number at the bottom of the recipient’s check. There will be a string of numbers in the lower left-hand corner that contains this information. The first nine digits are the routing number, while the next 12 digits are the account number.

The final four numbers are the check number, which isn’t relevant for an ACH transaction. Once you have this information, you can initiate the transfer with your bank.

Suppose you need to send money to financial institutions instead of an individual. In that case, you can initiate automatic transfers through your bank, as long as the recipient is eligible to receive them.

Receiving an ACH Transfer

To receive an ACH transfer, you’ll need to provide the sender with the same information as above: your bank account number and routing number. Some places, such as your employer setting up direct deposit, may request a voided check to retrieve that information directly.

Another option is to use a third party like PayPal. It’s quick and easy, although you may experience processing times between three and five days when you transfer funds to your bank.

Sending money to friends and family in the U.S. is free. However, if you want to send money abroad, it costs a percentage of the amount you’re sending. It varies based on the recipient’s country and how the transfer is funded.

PayPal charges 2.9% of the transaction amount to receive payment for goods or services, plus $0.30. You can compare the costs of similar services, but these fees are fairly standard.

Are ACH transactions safe?

Generally speaking, ACH transactions are safe and secure to use. Overall, ACH fraud is extremely rare. However, to receive funds, you do have to turn over your bank account numbers, which is sensitive information.

Make sure you trust the recipient; otherwise, they could potentially use your bank information to withdraw funds from your account. If you encounter a fraudulent withdrawal, be prepared to pay a fee. You’re liable for $50 if you report the incident within two days and $500 if you report it within 60 days.

So, it’s important to check your bank account regularly to make sure all of your debits are accurate. If you notice anything out of the ordinary, report it to your bank immediately to prevent any major liability. After all, you don’t want to be out $500 because of ACH fraud!

Canceling an ACH Transfer

A final issue to consider when receiving ACH payments is that, in limited circumstances, the sender can actually reverse the transaction.

Check with your bank about how they handle this process because it differs from place to place. Though rare, this could happen, for instance, if your employer deposits the wrong amount into your bank account.

Rather than asking you to return the funds manually, they could simply reverse the funds to come back to them.

If there aren’t any mistakes or you’re not a victim of fraud, you typically don’t need to worry about this happening with your ACH credits. Still, it’s something to be aware of, particularly if you receive direct deposits from your employer.

Lauren Ward
Meet the author

Lauren is a Crediful writer whose aim is to give readers the financial tools they need to reach their own goals in life. She has written on personal finance issues for over six years and holds a Bachelor's degree in Japanese from Georgetown University.