How to Do an ACH Transfer: Step-by-Step

The Automated Clearing House (ACH) network is an electronic funds transfer system in the United States. It facilitates the movement of money between bank accounts, enabling individuals and businesses to manage their finances electronically. The ACH system underlies many common financial activities, providing a streamlined alternative to traditional paper checks.

Understanding ACH Transfers

ACH transfers operate on a batch processing system, collecting transactions throughout the day for group processing rather than individually in real-time. This method contributes to their lower cost compared to other payment types, such as wire transfers, which process funds immediately and incur higher fees. The ACH network handles two types of transfers: direct deposits and direct payments.

Direct deposits push funds into an account, commonly seen with payroll or government benefits. Direct payments pull funds from an account, often used for recurring expenses like utility bills, loan payments, or online purchases. Both types leverage the same electronic network, providing a consistent and cost-effective way to manage financial obligations and receipts.

Information Required for ACH Transactions

To complete an ACH transaction, specific banking details are necessary. The bank account number is a unique identifier for a particular account, ensuring funds are directed to or withdrawn from the correct destination. This number is distinct for each checking or savings account.

The bank routing number, a nine-digit code, identifies the financial institution. You can typically find this number on checks, online banking platforms, or bank statements. It is important to confirm the correct routing number for ACH transfers, as some banks might use different routing numbers for other types of transactions.

The account type, specifying whether the account is a checking or savings account, is also required. This distinction helps the receiving financial institution correctly categorize and process the transaction. The full legal name of the recipient or sender is necessary to accurately identify the parties involved. The exact amount of money to be transferred must be clearly specified. For direct payments, explicit authorization from the account holder is required before any funds can be debited.

Steps to Send an ACH Transfer

Initiating an ACH transfer typically begins within your own banking environment. After gathering recipient banking details (account number, routing number, and account type), access your online banking portal or a payment platform. Navigate to the section designated for transfers or payments, often labeled “Send Money” or “External Transfers.”

Within this section, select an option for an ACH or bank transfer. You will then be prompted to input the recipient’s information, including their full legal name, bank routing number, bank account number, and account type (checking or savings). Carefully enter the precise amount you wish to send. Before finalizing, a review screen will display the entered details for your confirmation. After verifying accuracy, confirm the transfer, and the system will process your request.

Steps to Receive an ACH Transfer

To receive an ACH transfer, such as a direct deposit for payroll or government benefits, provide your banking information to the payer. This includes your bank’s routing number, personal bank account number, and the account type (checking or savings). Your full legal name, as it appears on your bank account, is also a necessary detail for the payer.

Often, employers or government agencies provide a direct deposit form for this purpose. Fill out this form with your banking details, ensuring accuracy to prevent delays. Some payers may also offer an online portal where you can input this information. Providing these details enables the sender to initiate the electronic transfer to your account, ensuring timely and accurate receipt of your funds.

Key Aspects of ACH Transactions

ACH transfers typically process in one to three business days. Same Day ACH, introduced by Nacha, allows payments up to $1 million to be processed and settled within the same business day, offering faster access to funds. This expedited service involves specific daily cut-off times, and transfers initiated after these times will be processed on the next business day.

Financial institutions impose daily or monthly transaction limits on ACH transfers, which vary significantly between banks and based on account type or customer relationship. Daily limits can range from $2,000 to $25,000, though some premium accounts might have higher thresholds. Check with your specific bank for their limits.

After initiating an ACH transfer, you will receive a confirmation number or an email notification from your bank or payment platform, acknowledging the request. While ACH transfers are generally secure, monitor your account activity to ensure the transaction processes as expected. The cost of ACH transfers is notably low, or often free for consumers, especially for direct deposits or standard bill payments. Businesses typically incur a small fee, ranging from a few cents to around $1.50 per transaction, making ACH a cost-effective alternative compared to wire transfers or credit card payments.