ACH payments are a secure way to electronically transfer funds between institutions and is the technology behind direct deposit, payment apps, and many other digital payment services. ACH stands for “Automated Clearing House,” which is the service that conducts these transfers. Virtually everyone deals with ACH payments at some point in their lives. Here’s what you need to know about this common aspect of 21st-century banking.
Benefits of ACH Payment
When it comes to ACH payments, there really are no downsides. That’s why they’ve become the default method of transferring funds. Here are some of the major benefits of ACH payments.
It’s natural to have concerns about the safety of digital payments, but ACH payments are among the safest ways to exchange money online. As long as you are sure that you’re sending the money to the correct account, the money should get there securely. Institutions involved in ACH payments must register with the National Automated Clearing House Association (NACHA), and money goes directly from one registered institution to the other. It’s even safer for recipients, who are simply receiving a secure payment.
Once you set up ACH payments with an employer, utility provider, or anyone else, it’s the most convenient way to pay (or get paid by) them. The money is sent quickly, and you don’t need to swipe any cards, cash any checks, or take any extra steps to complete the transaction.
In the case of paychecks, ACH payments will plop the money directly into your account. Payments you make to other entities only need to be established once, and then the next payment will take just a couple of clicks or taps. With bill payments, you may be able to automate payments, so you don’t even have to worry about meeting due dates or paying the correct amount.
ACH payments are usually free. There are exceptions, but most people should find that they can set up a direct deposit for paychecks and pay their utility bills without any extra fees. In fact, when it comes to utilities, you may be charged a fee if you don’t use ACH payments.
It’s important to blaze your own trail on occasion, but other times, it’s just so much simpler to go with the flow. That’s how it is with ACH payments — they’re the preferred money transfer method of most major institutions. By familiarizing yourself with ACH, you’re ensuring that you’re up-to-date on the most common way to transfer funds.
Who Uses ACH Payments?
The short answer is that nearly everyone uses ACH payments. If you’re sending money electronically, ACH is most likely involved. Here are some common examples.
Banks use ACH payments to send money to each other every day. Bank customers can use ACH payments to send money directly to the bank accounts of friends and family members. The money moves securely from one account to another, and the only hands that touch the money are the banks involved.
It’s rare that companies go through the effort to register to accept ACH payments, but many utility companies do. They prefer to have a direct link to your bank account to best ensure a smooth bill payment. Because of this preference, you may be charged a fee for using a credit card instead of an ACH payment (but this depends on your provider).
Even if you can use another bill payment method for free, ACH is probably the most convenient option. Simply give the utility company your account information and allow them to make payments automatic — late bill payments will become a thing of the past.
Cash Sharing Apps
If you’ve ever used an app to split a bill with a friend or pay your half of rent to a roommate, that was probably an example of an ACH payment. All major payment apps use ACH payments. It’s the quickest, most secure way to spend money, and apps are all about making our lives more convenient.
Your Employer – Direct Deposit
Another common real-world example of ACH payments occur when you set up a direct deposit with your employer. Instead of printing out a paper check to physically give to you, your employer can instead trigger an ACH payment to land in your account.
It’s a win for everyone involved — your work saves on the costs (and environmental waste) of printing out a physical check, you save the hassle of finding a place to deposit or cash it, and your bank doesn’t have to deal with the check deposit process.
How Long Do ACH Payments Take?
Aside from someone handing you a fist full of cash in person, ACH is one of the quickest ways to send or receive money. The typical ACH payment takes two or three days to complete. Wire transfers are a little faster than that, but those typically come with fees.
However, MoneyLion customers have a huge advantage here. While ACH transfers take two or three days, RoarMoney account holders get direct deposits into their accounts up to two days early. That means you could be getting paid even earlier every payday!
ACH Is Best for Everyone Involved
When you see that an institution like MoneyLion uses ACH, you should take feel reassured about the safety of your money. It means that the institution went through the rigorous process of registering to use ACH payments, and the payments you make will pass through as few hands as possible.
MoneyLion account holders can use ACH to set up direct deposit paychecks from work, pay down loan debt, or pay off your monthly electricity bill.