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What Are ACH Transfers?

ACH transfers are the easiest way to transfer money electronically between bank accounts held at different banks. You can use them to send or receive money both securely and conveniently. In fact, you may already use them and not even know. For example, direct deposit is a form of an ACH transfer, as is paying bills online. They are used by many people, including business owners who can use them to pay vendors or receive payments. 

ACH transfers can be the most user-friendly and cost-efficient alternative to writing checks or paying with debit or credit cards. The following information will explain everything you need to know about ACH transfers. 

What Are ACH Transfers?

ACH transfers are electronic transfers of money that are handled bank-to-bank. They are processed through the Automated Clearing House Network. Essentially, the ACH network is a system used for batch processing by banks and financial institutions to aggregate the processing of ACH transactions. Such transactions generally fall under two categories: Direct payments or direct deposits. 

ACH Direct Payments

Direct payments can be used by organizations, businesses, or individuals to send money. Examples of these ACH transfers include online bill pay and payments made through social payment apps such as Zelle and Venmo. 

In these transactions, the person who sends the money sees an ACH debit appear in their account. The debit shows whom the money was sent to and how much. The person receiving the money sees it as an ACH credit on their end. 

ACH Direct Deposits

A direct ACH deposit is any type of electronic transfer that originates from a government entity or business to a consumer. These are examples of payments which fit into this category:

  • Government Benefits
  • Paychecks
  • Interest Payments
  • Tax Refunds
  • Reimbursements from Employers
  • Annuity Payments

With this type of ACH, you always receive money. 

How Much Do ACH Transfers Cost?

Depending on how many of these transfers you make, the cost may be as low as a few dollars. In some cases, ACH payments may even be free, or you may receive a discount for a service or product for using it. 

How To Make AN ACH Transfer

To send money via ACH, you need to know the account number and routing number associated with the recipient’s account. Your bank may also want you to know the names of the account holder and the financial institution for confirmation. 

Some credit unions and banks require you to use a third part service to initiate ACH transfers. The process is generally easy and doesn’t take long to complete. 

In most cases, ACH transfers can be made online. However, sometimes you may need to go to the bank. 

Advantages of ACH Transfers

ACH Transfers are a common way for employers to pay their employees.

Using ACH services offer great convenience. For instance, using an ACH to pay bills and other recurring expenses tends to save time over writing checks and mailing them. Additionally, it can save you money on stamps and proves to be more secure than other types of payments. 

As we mentioned, the process is generally quick. In fact, in most cases, the transfer is completed within a day after initiation. ACH credits usually settle within one to two business days, whereas ACH debits settle on the following business day. 

Another advantage is most ACH transfers are free. However, this will depend on where you bank and what type of transfer you’re attempting. Most banks don’t charge anything to move money from your bank account to an account at a different financial institution. If they do charge a fee, it’s usually no more than a couple dollars. 

Are There Any Disadvantages Of ACH Transfers?

While the ACH transfer process is convenient, it’s not perfect. Here are a few drawbacks to keep in mind. 

Transaction Limits

Most banks place limits on how much you can send through ACH transfers. Some of these limits may be per-transaction, while others can be daily, weekly, or monthly. 

Also keep in mind that when you transfer from your savings account too frequently it can trigger penalties. This is because these accounts are controlled by Federal Reserve Regulation D. This regulation limits specific types of withdrawals to only six per month. When you go over this limit, you may incur excess withdrawal penalties. Furthermore, if you do this too often, your bank may convert the savings into a checking account. 


When dealing with ACH transfers, timing matters. In fact, there are generally cutoff times for each bank that you must have these transactions completed by in order for them to be processed on the next business day. If you initiate an ACH transfer after this deadline, it could be delayed. This can be a problem when you are waiting to initiate on a due date, as you may be charged late fees if the transfer isn’t completed in time. 

In conclusion, ACH transfers are very popular and convenient. They are by far the most secure way to send funds electronically, regardless if you are transferring your money or paying a bill. Just keep in mind that timing matters, and there may be transaction fees. If you can work around these two things, then ACH transfers are a great option for you! 

Are you looking for further reading? Check out our article on What Is A Voided Check Used For.