The Automated Clearing House (ACH) is an electronic payment and funds-transfer system that began operating in the United States in 1974. It enables payments between banks and financial institutions to be made securely and quickly, reducing the need for manual check-writing and making payments easier for businesses, consumers and government entities.

The ACH is managed by the National Automated Clearing House Association (Nacha), which is responsible for setting operating rules and processing times for transactions. For years, funds transferred by the ACH have cleared in batches on an overnight basis. However, in September 2016, Nacha implemented new regulations that allow certain transactions to clear the same business day.

Benefits of Using the ACH

The primary benefit of the ACH is convenience and speed. Typically, funds are made available faster than they are with a paper check. It is also more secure than using a check, as it eliminates the need to send physical paper and can reduce the risk of fraud. In fact, Nacha estimates that checks cost businesses up to 20 times more to process than an ACH transaction. Finally, the ACH reduces operating costs, as it can reduce manual data entry and overall times spent entering data.

Banks may impose limits on the amount of money you can send via the ACH, and fees for making ACH transfers vary among financial institutions. Therefore, it is important to ensure you understand the cost and benefits associated with your institution's ACH service prior to making a transaction.

Conclusion

In conclusion, choosing the ACH for payments or funds transfers can offer many benefits for businesses and individuals, such as convenience, security, and cost savings. Although banks may limit the amount you can send and impose fees, choosing the ACH can still be a worthwhile and cost-effective choice for many transactions.