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ACH payment stands for automated clearing house payment is a secure online money-transfer system where money is sent from one bank account to another and can be either a credit or a debit in batches. It can be recurring and one-time payments and also used for government, consumer and business-to-business transactions and international payments which facilitates in the U.S. It is run by NACHA i.e. National Automated Clearing House Association.
Why should one choose it?
- It improves the security of your bank information and prevents money loss.
- It is a paperless online payment or automated money transfer system between banks and financial institutions.
- A company can easily make the payment for electronic bills, rent and other expenses.
- An individual can use this to pay through the Direct Payment system as an ACH credit or ACH debit.
- It makes online transactions fast, easy and often free
- Money can be sent globally in multiple currencies like AUD, EUR, GBP, INR, and USD
Types of ACH transfers
There are two types of ACH transfers-
- Direct Deposit - Money can be deposited directly into your account online. This deposit is made from a business or government entity to a consumer.
For example,
- Paychecks
- Tax Refunds
- Employer-Reimbursed Expenses
- Bonuses and commissions
- Dividends and Interest Payments
- Government Benefits
- Annuity Payments
- Direct Payments - Money is deducted from your account. This payment is made by individuals, businesses, and other organizations to send money.
For example,
- With the help of your bank account, you can pay your bill online.
- Paying for subscription and membership
- Charitable donations
- Insurance & tax payment
- Investment accounts funding
- Loan payments
How does it work?
The ACH network uses a batch processing system to process payments. A financial institution collects a large number of payments at a specific time of day and processes them all at once.
To enforce the ACH payment, you must do the following:
- Register your account with your online bill payment service or authorise it on the billing company's website.
- Schedule a payment date for the one-time payment or mandate.
- If the payment date changes, the company will send you a written notification at least one week before the next payment date.
ACH Fees
- ACH charges no fee for using Direct Payment or Direct Deposit.
- Most banks and credit unions provide free online bill payment services.
- Some government agencies, electronic tax filing services, and other service providers may charge a convenience fee.
How to set up an ACH Direct Deposit and Direct Payment?
Set up an ACH Direct Deposit:
- Get the authorization form from your bank.
- Fill up the personal and bank account details.
- Start receiving your payment directly in your bank account.
Set up An ACH Direct Payment:
- Sign up with the companies that send you bills or pay using your bank account.
- You can take the help of the company or go to their website to learn how to enrol in Direct Payment with your bank account.
- Schedule and make the payment from your bank account using their online banking website.
