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ACH Credit vs. ACH Debit – What’s the Difference?


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Nearly all of America’s businesses and citizens rely on the ACH network for sending and receiving payments. Yet, if you were to ask someone, “what does ACH credit mean?”, chances are, they would be at a loss. 

Good news–ACH credits and debits are simple financial terms to understand. They encompass all sorts of popular fund transfers, such as direct deposits and recurring utility payments. But ACH credit and debits are not the same. Let’s dive into the meaning of ACH credit and ACH debit transactions. 

ACH Credit vs. ACH Debit

The main difference between an ACH credit and an ACH debit is that an ACH credit transaction is initiated by the sender of funds (typically a bank), whereas an ACH debit transaction is initiated by the receiver of funds, where the bank receives a payment request by the payee, and then sends the funds per request. Each type of transaction serves a purpose depending on your payment needs. 

What Does ACH Mean?

ACH stands for the Automated Clearing House and is an electronic network used by businesses across the US to make automatic payments. Find more ACH information here.

ACH Credit Meaning

An ACH credit (or ACH credit transaction) is essentially a digital check “written” by the payer that instructs the ACH network to transfer funds from their account to the payee’s account. An ACH credit transaction is completely electronic, eliminating the need for a written paper check and a visit to the bank. Examples include common activities such as receiving direct deposit from an employer or government benefits through Social Security. 

Often referred to as “push” transactions, ACH credits typically take 1-2 business days to process because the request for a transaction is not immediately sent. By far, the most common type of ACH credit is direct deposit.

You can also use ACH credits to make payments (as opposed to getting payments). For example, setting up automatic bill pay or mortgage pay with your bank. Another example is business owners that choose to pay state taxes through ACH credit. Although the word “credit” may make you think of making purchases with a credit card, the above examples highlight how an ACH credit can also be used to make payments. 

ACH Debit Meaning

Initiated by the payment receiver, an ACH debit is the most popular type of ACH transfer. Also known as a “pull” transaction, the receiver is “pulling” funds from the payer. An ACH debit transaction is different from–and typically preferred over by merchants–an ACH debit card transaction. With debit card transactions, merchants pay at least 1% of the total transaction amount.

In order to do an ACH debit transaction, the receiver provides their routing and account numbers to the payer.  For this reason, ACH debit transactions are seen as a little less secure than ACH credit transactions. But they still remain extremely popular for recurring utility or insurance billing. 

Essentially, ACH debit transactions give companies the authorization to pull what they’re owed from your bank account. They occur faster than ACH credit transactions, where the National Automated Clearing House (NACHA) has implemented rules that say ACH debit transactions must be completed within one business day. 

How Does ACH Credit Work?

An ACH credit transfer is done much the same way, with the exception that the payer this time is the one who initiates the transfer. Funds are pushed into the receiving deposit account by the payer. If a business pays an invoice using the Automated Clearing House, the payment would be an ACH credit to the payee’s account. 

How Does ACH Debit Work?

An ACH withdrawal is initiated by the payee. To start the process, the payee submits a request to the Automated Clearing House to pull funds out of the payer’s account. Everything between funds leaving the outgoing account and entering the incoming account is handled by the ACH network. All that is required to make a successful transaction is account information for both bank accounts. 

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Fees for ACH Debit Transactions and ACH Credit Transactions

Whether using an ACH credit or debit, processing fees are usually low, and oftentimes nonexistent. That being said, some banks do charge fees as a way to demotivate you from moving your money out of their bank account. That’s why you may experience a fee for outgoing ACH transactions, but not incoming ACH transactions–banks want more money going into your account with them, and not out! 

For quick reference, some popular banks that charge outbound ACH transaction fees include:

  • Bank of America
    • $3 for standard delivery and $10 for next-day delivery
  • BB&T Bank
    • $3 for standard delivery and $10 for next-day delivery
  • BBVA Compass
    • $3 for standard delivery 
  • Citizen’s Bank
    • $3 for standard delivery and $10 for next-day delivery
  • Fifth Third Bank
    • $3 for standard delivery 
  • M&T Bank
    • $3 for standa/rd delivery
  • PNC Bank
    • $3 for standard delivery if done at bank, $0 for standard delivery if done online
  • SunTrust Bank
    • $3 for standard delivery and $6 for next-day delivery
  • TD Bank
    • $3 for standard delivery and $7 for next-day delivery
  • U.S. Bank
    • $3 for standard delivery 

As a best practice for avoiding fees, try pulling money into one bank account from another, rather than pushing money out of one account to another. But again, it’s not always possible to avoid these fees because at the end of the day, they cover the costs of ensuring funds are transported securely through the ACH network.

Is ACH Credit or ACH Debit Right for Your Business?

The ACH system may be one payment option among many your business can use to submit bill payments such as utility bills, rent payments, invoices, and credit card payments. 

The first requirement is for the payee to have a bank account in the U.S. The ACH network does not include foreign financial institutions. For cross-border payments, a business must adopt some other form of payment; and there are many electronic options available. These include wire transfers and virtual payment platforms. 

For U.S.-based payments, ACH transfers offer convenience and cost savings, especially when compared to domestic wire transfers. It’s possible to establish recurring ACH transfers for periodic payments and credits. This “set it and forget it” system can provide businesses with a level of convenience not available with older forms of payment. 

In some situations, the ACH network may not be ideal for your business. It’s not possible to earn rewards points with ACH transfers, for example. Some business credit cards do offer this great service. Points can be accumulated and used for all sorts of purposes, such as paying for travel or hotels. 

One Among Many

ACH debits and credits are a convenient way of sending and receiving payments. They often provide advantages over other payment systems; although in some situations, a business may want to consider other forms of electronic transfers. 

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