Think of the postal service: It’s 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 transfer.
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?
On average, ACH transfers take about one to three business days to complete.
There are two kinds of ACH transactions—ACH debit transactions and ACH credit transactions—and 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 transaction. This brings the total 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
- The originating party initiates a credit or debit transfer. (Starts the process.)
- The originating institution (or ODFI) batches the transaction along with other ACH transfers. 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.)
- 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. (Takes one business day to complete.)
- The receiving bank processes the transaction. In order 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. (May take between one to two business days to complete.)
- Funds are deposited in the receiving accounts. (Ends the process.)
Limitations of ACH transfers
Although ACH transfers are efficient, secure, and low cost, they’re not ideal for all transactions. Business owners may select other methods for time-sensitive or high-dollar payments. International transfers are also not provided through the ACH network.
- 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 United States–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.
How long does an ACH transfer take? FAQ
What time of day are ACH transactions posted?
Standard ACH credit transactions can post as soon as 8:30 in the morning the following day, while ACH debit transactions typically take one to three business days to complete. The ACH network submits transactions at 6 a.m., 12 p.m., 4 p.m., 5:30 p.m., and 10 p.m. Eastern Time (ET). The receiving bank’s policies and schedule determine when transactions post to the receiving account.
Why aren’t ACH transfers instant?
ACH transfers are processed in batches throughout the day, they are not instantaneous. Also, the receiving bank may choose to hold the funds before releasing them to ensure the originating bank has sufficient funds. This means ACH transfers take an average of one to three business days to complete.
Do ACH transfers really take three days to process?
ACH transfers don’t always take three business days to process. Some banks offer same-day ACH payments. Whether or not same-day processing is available to your business (and how much it costs) depends on your bank’s policies. Contact your financial institution for more details.
Can you speed up ACH payment?
You can speed up ACH payments by requesting same-day transfers and by submitting transfer requests early in the day. If an immediate transfer is required, contact your bank about initiating a wire transfer instead of an ACH transfer. Although wire transfers typically cost more than ACH transactions, they usually process within 24 hours.