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ACH Payments - How ACH Payments Work

How ACH Payments Work

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Checkbook and computer

Consumers can provide checking information online to make ACH payments

Bruce Laurance / Photographer's Choice RF / Getty Images

ACH payments are electronic payments made through the Automated Clearing House (ACH) Network. Using this method of payment (as opposed to paper checks or credit card payments) can help reduce errors, speed things up, and save money and resources.

You may be more familiar with ACH than you think: if your employer pays you through direct deposit or you pay bills electronically out of your checking account, ACH payments are at work.

Basics of ACH Payments

ACH payments are simply electronic transfers from one account to another. Common uses include:

  • A customer pays a service provider
  • An employer deposits money to an employee's account
  • A consumer moves funds from one bank to another
  • A business pays a supplier for products

Because they’re electronic, ACH payments use fewer resources (paper, ink, fuel to transport checks, etc). In addition, electronic transactions make it easier to keep track of your finances. Instead of generic check information on a bank statement ("Check #3509 for $45.82" - what was that for?), you see the payee's name if you’ve used an ACH payment. Then it’s easier to categorize the transaction with your financial software.

ACH payments can be electronic from start-to-finish, or they can happen when a paper check is converted and processed electronically.

Why Businesses Like ACH Payments

Businesses benefit from sending and receiving ACH payments. When customers pay by check, businesses need to wait for the mail to arrive - then they need to get the check to the bank. Payments get lost sometimes, and entering those payments into a recordkeeping system is labor-intensive. Electronic payments are received more quickly and reliably, and there’s no need to forward checks to the bank and wait a few days to find out which checks bounced. For businesses that accept payment by credit card, it costs less to process ACH than it costs to accept a credit card payment.

Why Consumers Like ACH Payments

Consumers also benefit from ACH payments. There’s no need to write checks and get them into the mail on time. If using automatic ACH payments, they do not need to keep an eye out for bills - everything runs on autopilot - for better or worse.

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