ACH Transfer: What Is It and How Long Does It Take? (2024)

The postal service is an affordable, reliable, and efficient system for delivering your mail—especially given the volume and distances involved.

The Automated Clearing House (ACH) transfer network is like the postal service of the electronic funds transfer (EFT) universe, where individual ACH transactions are like pieces of mail. 

By submitting transfer requests in batches—the same way the post office collects and distributes mail at predetermined pickup and delivery times—the ACH network offers a cost-efficient and secure way to move money in exchange for slightly longer processing times than other types of electronic funds transfers.

This guide shares the typical ACH transfer processing time alongside rules and regulations you’ll need to consider when using this type of electronic payment. 

What is the Automated Clearing House (ACH)? 

The ACH is a digital network that processes electronic payments between banks. The ACH transfer network is maintained by an organization called NACHA, or the National Automated Clearing House Association, a 501(c)(6) not-for-profit association connected to approximately 11,000 different financial institutions across the United States.

How long does an ACH transfer take?

An ACH transfer typically takes one to three business days to complete, although same-day processing options are available for an additional fee. Ensuring that all transaction details are accurate and submitted before the bank’s cutoff time will help expedite this process.

There are two kinds of ACH transactions: ACH debit transactions and ACH credit transactions. The NACHA mandates different processing speeds for each:

• ACH credit transactions. ACH credit transactions move money from an account at the originating depository financial institution (ODFI) to an account at the receiving depository financial institution (RDFI) and must be processed within two business days. An example of an ACH credit transaction is a payroll direct deposit. 
• ACH debit transactions.ACH debit transactions move money from an RDFI account into an ODFI account and must be processed within one business day. Bill payments are one form of ACH debit transaction.

RDFIs often hold transactions for an additional one to two business days, which allows time to verify the debited bank account holds sufficient funds to cover the ACH transaction. This brings the total ACH transfer time to an average of one to three business days.

Many financial institutions also offer same-day ACH transfers for an additional fee. Note that depending on the time of day the transfer is initiated (such as a transfer initiated after a bank’s business hours), same-day transfers can still result in funds appearing in the recipient account the following business day.

How ACH transfers work

ACH transfers follow a step-by-step process. Each step can take as little as an hour or up to two business days, depending on the transaction type, the schedules and policies of the participating financial institution(s), and the time of day the request is submitted.

Here’s a rundown of the ACH transfer process:

1. Initiation. The originating party initiates a credit or debit transfer. 
2. Batching. The originating institution (or ODFI) batches the transaction along with other ACH transfers. 
3. Sending. Batched transactions are sent out to the ACH network at regular intervals during the business day. Depending on when the request is submitted, these transactions can be sent within the hour or might not be sent until the next business day. (May take up to one business day to complete.)
4. Receiving. An ACH operator—either the Federal Reserve or the Electronic Payments Network—receives the batched transactions, sorts them, and submits the transactions to the RDFI. The ACH network submits transactions to receiving institutions five times per business day. (This takes one business day to complete.)
5. Processing. The receiving bank processes the transaction. To verify the debited account doesn’t contain insufficient funds, some financial institutions choose to hold funds for a set amount of time before depositing the transferred funds into the account to be credited. (This may take between one to two business days to complete.)
6. Depositing.ACH funds are deposited in the receiving accounts.

Limitations of ACH transfers

Although ACH transfers are efficient, secure, and low cost, they’re not ideal for all transactions. Here’s why:

• Processing times. Because ACH transfers are processed in batches, direct ACH payments typically take one to three business days to appear in the recipient’s account—longer than it generally takes to process wire transfers, credit card transactions, and ATM transactions.
• No international payments. ACH payments can only be deposited into US-based bank accounts. International money transfers require wire transfers or other payment methods. 
• Transfer limits. Some banks impose daily, weekly, monthly, or per-transaction limits on the amount of money that can be sent by ACH. Check with your bank to make sure its policies provide the kind of transfers you need to support your business operations.

ACH transfer rules and regulations

• NACHA guidelines
• Authorization requirements
• Consumer protection laws
• Fraud prevention measures
• Record-keeping and compliance

Learn about the following regulations before you process ACH transfers:

NACHA guidelines

The National Automated Clearing House Association (NACHA) is a regulatory body that oversees all ACH transactions and enforces regulations that businesses must follow when making this type of electronic payment. 

The NACHA’s rule book is extensive, including things like:

• Obtaining a customer’s explicit permission to process an ACH payment 
• Providing notice for any changes to a payment schedule
• Canceling subscriptions promptly

Failing to comply with NACHA’s ACH guidelines could result in fines of up to $500,000 per month, so it’s worth reading its documentation before using ACH payments in your business.

Authorization requirements

Customers need to submit an ACH authorization request before you can process their ACH payment. This form should include fields like:

• Company information such as address and contact number
• Payee name, bank account number, and routing number
• Type of transaction
• Amount to be paid
• Frequency of the transaction and permission for future debits
• Terms and conditions 
• Signature 

While this form might sound like an unnecessary step with the potential to turn customers away, you must have explicit permission to take payment from a customer before doing so. This authorization document is a paper trail that proves permission has been granted.

Consumer protection laws

Consumers are protected when making ACH payments if the payment was unauthorized. This can happen if:

• The customer never authorized the payment (or have revoked their permission)
• The payment was taken from their account earlier than agreed
• The amount taken from their bank was higher than initially authorized

Provided that the customer flags this unauthorized payment to their bank within 60 days of receiving their statement, their bank must refund the amount. The bank will try to reclaim this money from the merchant. 

Fraud prevention measures

Fraud can happen when people misuse the ACH system to illegally obtain money. Data theft, phishing scams, and account takeovers are common examples of how this is done. 

You must have fraud prevention measures in place to limit the chances of ACH fraud. This includes (but is not limited to) using two-factor authentication for any login credentials, verifying payment details, and training your team on how to detect threats.

Record-keeping and compliance

ACH compliance means that your business abides by the NACHA rules and any applicable laws. Record-keeping helps prove this compliance and resolve any disputes (i.e., fraud or refunds) since you’ll have a paper trail of evidence to support each transaction. 

Common uses of ACH transfers in ecommerce

• Recurring billing and subscriptions
• Vendor payments
• Payroll processing
• Customer refunds
• Direct debit for online purchases

Recurring billing and subscriptions

Insurance providers, utility companies, and brands offering product subscriptions often use ACH transfers. The ability to set up recurring payments means the business doesn’t need to manually process payments according to the payment schedule. The customer has already authorized that payment to leave their account. 

Vendor payments

The ACH offers lower payment processing fees than alternative methods like wire transfer or credit card payment, making them ideal for larger transactions. It’s also quicker for suppliers to receive money when you use ACH payments for paying bills (as opposed to paper checks). 

Payroll processing

Payroll is done on specific days of the month. Pushing these through an ACH payment means you don’t need to schedule time to initiate manual payments. Automation also means they get the right amount paid into their bank account. Employees get their full salary paid on time, every time. 

Customer refunds

ACH payments are secure and easy to track, hence why most brands use them to issue refunds. There’s no risk of a check getting lost in the mail, or a customer losing their gift receipt. The money goes straight into the customer’s bank account they used to pay for the item. 

Direct debit for online purchases

ACH payments don’t require customers to enter their credit card information each time they make an online purchase. This eliminates the risk of failed transactions due to incorrectly typing their credit card details or using expired credit cards. The bank account details you’ve already collected don’t change.