A Guide to ACH: How Money Moves Around Without Checks

Jul 30, 2023 By Susan Kelly

The Automated Clearing House (ACH) network is a great way to move money around without using paper checks. Whether you’re a merchant, business owner, or individual looking for an efficient and secure way to pay bills, send money quickly from one account to another, or even deposit funds into your bank account.

ACH can be an incredibly valuable tool. But navigating the many complex terms and regulations of payments through ACH can be tricky - which is why we’ve put together this guide.

In this post, we'll explore what exactly ACH is and how it works so you have the information needed to best utilize the power of automated payments.

ACH, and how does it work

ACH stands for Automated Clearing House. An electronic transfer system moves funds from one bank account to another. This process eliminates the need for paper checks and makes money transfers easier, faster, and more secure.

Using ACH, banks can send authorized payments from one bank account directly to another without having a physical check or other physical document. This allows funds to move quickly and securely with minimal cost and risk of fraud.

When a customer wants to initiate an ACH transfer, they will provide the receiving bank's routing number and account number along with the amount they wish to send. The sending bank will then authorize the transaction and notify the receiving bank. Finally, the receiving bank will check the transaction details and approve it.

Benefits of Using ACH as a Payment Method

Using ACH as a payment method has many advantages over using checks or cash. The most obvious benefit is the convenience since funds can be transferred from one account to another in just a few days. Unlike checks, there are no physical documents to sign and send; all transactions occur online.

Additionally, transactions through ACH are secure, making them less susceptible to fraud and theft. Furthermore, ACH payments are typically cheaper than check payments as they don’t require payment processing fees like checks. Finally, using ACH can save time since funds can be transferred quickly without any paperwork or effort from the sender or recipient.

Overall, utilizing ACH as a payment method can make your life easier and more secure. You can trust that your payments will be processed quickly, securely, and without extra costs. It’s an ideal method for transferring funds between banks or accounts.

Key Players in the ACH Network

Three core players have distinct roles in the money-moving process regarding the ACH network. The first is the Originating Financial Institution (OFI). This is typically a bank or credit union where funds originate and then move on to their final destination.

The second player is the Receiving Financial Institution (RFI), the bank or credit union that receives the funds.

The third player is the Automated Clearing House (ACH) Network, a secure and efficient electronic payment network for OFIs and RFIs. It’s also responsible for clearing and settling all transactions between them.

In addition to these three core players in the ACH network, other entities play a role in the money-moving process. These include merchant acquirers, third-party service providers, and software developers who ensure all transactions run smoothly.

Security Concerns with ACH Payments

One of the greatest advantages of ACH payments is the security they offer to both businesses and individuals. The NACHA regulations governing all ACH transactions provide a robust system of authentication, verification, and authorization for all transfers that helps reduce fraud risks by ensuring that only authorized users access funds.

Additionally, since data is encrypted in transit over the ACH network, the risk of stolen information decreases during transactions. ACH payments can also provide security for businesses, as they don’t need to store sensitive customer information to process payments.

Since all the necessary data is taken directly from bank accounts, merchants no longer have to worry about storing credit card numbers or other private data which could be compromised in the event of a data breach.

Common Uses for ACH Payments

ACH payments offer a simple and secure way to move money. They can be used in many different ways, from direct deposits for payroll to transferring funds between accounts, paying bills online, or receiving payment for services. Businesses often use ACH payments to simplify their financial operations. For example, they may use ACH transfers to pay vendors or collect customer payments.

Individuals can also benefit from ACH payments. They can use them to pay bills online, transfer funds between their accounts at different banks, and even receive deposits from employers for direct deposit payroll. Additionally, some financial institutions offer ACH payment services that allow customers to send money directly to other individuals via their bank account or mobile banking app.


What are the two types of ACH payments?

Automated Clearing House (ACH) payments are electronic payments processed through the ACH network. It is a system of transferring funds widely used for consumer and business payments. There are two types of ACH payments: credits and debits, which work in tandem to move money from one bank account to another.

What is the flow of ACH funds?

ACH payments are initiated with an ACH origination, which the payer does. The funds move through a network of processing centers before they reach the payee's account. Each transaction is verified and authorized by the financial institution involved. Once authorized, ACH credits arrive at the payee's bank within one to two business days, while ACH debits arrive within one business day.

What does an ACH transfer look like?

An ACH transfer looks like a debit or credit entry on your bank statement. ACH transfers initiated from your account appear as debits, while those received into your account will appear as credits. The transaction description also typically includes the originator's name and routing number.


ACH is an efficient and secure payment method capable of automating everyday payments and simplifying business payments. As businesses look to adopt new ways of managing their finances to stay competitive, ACH technology is a viable option for handling payments easily while protecting sensitive financial information. Setting up an ACH system for your company is essential to get the most out of these features.

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