Why Would an ACH Payment Not Go Through?
Learn why ACH payments fail. This guide explains the common underlying issues that prevent electronic bank transfers from processing successfully.
An Automated Clearing House (ACH) payment represents an electronic funds transfer between bank accounts, processed through the ACH network. This system is widely used in modern finance for various purposes, including direct deposit of paychecks, automatic bill payments, and business-to-business transactions. While highly efficient and generally reliable, ACH transactions can sometimes encounter issues that prevent them from completing successfully. This article explores the common reasons why an ACH payment might not go through, shedding light on the mechanics behind such failures.
Incorrect Details
One of the most frequent reasons an ACH payment fails is inaccurate transactional information. Even a single incorrect digit can lead to a payment being rejected. For instance, if the bank account number entered is incorrect, the payment will be returned.
Similarly, the routing number, which identifies the financial institution, must be exact. An incorrect routing number will direct the payment to the wrong bank or a non-existent one, causing the transaction to be rejected.
Account name discrepancies can also cause issues. For example, sending funds to an individual’s name for a corporate account can lead to rejection. Specifying the wrong account type, such as designating a savings account as a checking account, can also cause failure.
Account Status and Funds
The status of bank accounts and fund availability are key factors for ACH payment success. A common reason for failure is insufficient funds (NSF), when the sender’s account lacks sufficient funds. When this occurs, the ACH payment is typically returned with a code indicating insufficient balance.
An ACH payment will also not go through if either the originating or receiving account has been closed. Any attempt to debit or credit a closed account will result in a rejection.
Accounts may also be frozen due to reasons like legal orders, suspected fraud, or bank restrictions. Such accounts cannot participate in ACH transactions, preventing payments. Even with a sufficient balance, funds might be on hold, making them temporarily unavailable for transfer.
Authorization and Transaction Rules
Beyond account details and fund availability, rules and authorizations govern ACH payment completion. If a consumer previously granted authorization for an ACH debit, then revoked it, future debit attempts will be rejected. Revocation often requires formal notification.
Similarly, an account holder can place a stop payment order on a specific ACH transaction to block the payment. Such orders are valid for a set period, preventing the debit from clearing. Authorization for ACH payments can also expire.
A one-time authorization will not permit subsequent transactions, and recurring authorizations may have a defined end date. Payments will not go through if authorization has expired.
Banks or accounts may also have daily or per-transaction limits, and exceeding these limits will result in rejection. The ACH network also detects and prevents duplicate transactions, automatically rejecting exact copies of recent payments.