A guide to ACH payments
What is an ACH payment?
An ACH payment is a type of electronic bank transfer in the United States and stands for Automated Clearing House payment. In the US, ACH payments can be a cheaper alternative to sending funds via wire transfer, Visa or Mastercard.
ACH payments can sometimes be referred to as ACH transfers or ACH transactions.
What are the different types of ACH payments?
ACH payments can be divided into two different categories; direct deposits and direct payments.
Direct deposits cover a variety of deposit payments, including both business and consumer expenses. Some of these include:
- Payroll
- Refunds
- Interest payments
Direct payments refer to the request of funds either by individuals or organisations, such as recurring bills. ACH payments can be transferred either by ACH debits or ACH credits, depending on whether funds are to leave or be paid into your bank account.
What is the processing time of an ACH payment?
When transferring funds within the US by ACH payment, the process is not instantaneous and can take up to three days to process depending on the time of day in which the payment is submitted. In many instances, however, the payment can enter the bank account the next day.
What is the cost of sending an ACH payment?
Whilst wire transfers are considerably quicker to process; they are costlier than sending an ACH payment. Sometimes these can be sent free of charge, though the average fee when sending an ACH payment in the US is usually around USD 0.29. Though wire transfers are ideal for urgent payments due to their speed, with the costs being considerably higher, it’s often worth evaluating whether it’s entirely necessary to send funds via this method.
There can also be other costs involved when sending and receiving ACH payments, which are often dependent on the volume of transactions. Large volume often results in reduced fees, with some of the additional charges including:
- Batch fee
- ACH return fee
- Flat fee per transaction
How are ACH payments processed?
When sending ACH payments, you must provide the correct information as this could lead to failure or delayed payments. You will be required to fill out some paperwork, usually online and provide your:
- Name
- Routing number
- Bank account number
- Account type
- Transaction amount
- The date for the transaction to be processed
You will also need to specify whether this will be a credit or debit transaction. If your business needs to receive payments from customers, you will be required to partner with a payment processing company to accept ACH payments.
What are the benefits of ACH payments?
ACH payments can be an extremely convenient way to transfer funds electronically due to its low cost, reasonable processing times, high level of security and ability to automate payments.
The simplicity of the process can also help improve customer relationships as it negates the need to write cheques, helping to reduce risk and stress when transferring funds.
Sending international payments to the US
If you need to send regular currency transfers to the US, it could be worth speaking to a foreign exchange specialist to ensure you get the best deal and efficiency when sending money abroad. To find out how Halo Financial could help you make overseas payments quickly and securely, please give us a call on 020 7350 5474.
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