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ACH payment processing is a cost-effective method for making business and personal payments electronically.
This article describes business payments made through the ACH network. Automated Clearing House members in the network are U.S. financial institutions, including banks and credit unions.
Key Takeaways
- ACH payment processing is a low-cost method for making digital payments between bank accounts, via the ACH network, administered by Nacha.
- Standard ACH payment processing takes up to 1 to 3 business days.
- Same-Day ACH payments settle within hours on business days.
What is ACH Payment Processing?
ACH payment processing is the electronic transfer of funds between the payer’s and payee’s bank accounts via the Automated Clearing House network of U.S. financial institutions, administered by Nacha. ACH payment processing is used for both recurring and one-time payments, instead of paper checks, wire transfers, credit cards, or debit cards.
The ACH payment method is a type of electronic funds transfer (EFT).
Nacha was originally called the National Automated Clearing House Association. According to Nacha, “35.2 billion ACH Network payments were made in 2025, valued at $93 trillion.”
The ACH network eliminates the need for paper checks. Instead, it processes two types of transactions: Direct Payments via ACH and Direct Deposits via ACH.
Types of ACH Payments
You may not realize it, but many types of electronic payments can be made, and you’ve probably already performed (or accepted) plenty. The different types of ACH transfers include:
- Paying bills electronically out of a checking account or savings account
- Direct payment via ACH transactions
- eChecks
- Recurring payments
- One-time payments
- Direct deposit paid from an employer to employees for payroll
- IRS payments
- Moving funds from one account to another as external transfers
The ACH network typically processes all of these payment methods.
Direct Deposit
Direct deposit using ACH is for one of the following:
- Payroll direct deposit
- Employee expense reimbursement
- Government benefits, such as Social Security
- Tax refunds
- Annuities
- Interest payments
This includes any ACH credit payment from a government or business to a consumer or another entity.
Direct Payment
The Direct Payment method is the use of funds to make an ACH payment. Businesses, non-profits, governments, or individuals can use an ACH credit or an ACH debit to make a direct payment.
- Direct payment processing by ACH credit will push the funds into a bank account. The payee makes an online bill payment through their bank or credit union, for example.
- Direct payment processing by ACH debit will automatically pull funds from a bank account for a recurring payment to pay the bills as they are scheduled for payment.
How Does ACH Payment Processing Work?
ACH payment processing works when ACH transfers go through a payment processor using either ACH credit or ACH debit. The ODFI in the ACH network is the Originating Depository Financial Institution, and the RDFI is the Receiving Depository Financial Institution.
ACH payment processing consists of these steps:
- Payer obtains payment information and authorization from the payee.
- Is the ACH Next Day or Same Day ACH?
- ODFI submits an ACH request during a Nacha scheduling window.
- Nacha verifies funds available and batches ACH payments for transmission to RDFIs.
- RDFI credits the payee’s bank account with funds availability by Nacha’s required settlement time.
Payee’s Payment Information and Authorization
The payee’s payment information and authorization for sending an ACH bank transfer include:
- Payee’s name/business name
- Payee’s contact information
- Payee’s bank name
- Whether checking or savings account for the ACH
- Routing number and bank account number
- Any required authorization form from the payee, including signature or digital authorization.
An ACH authorization form from the payee is required:
- To pull funds (ACH debit) from a bank account (such as a recurring utility bill pay).
- For direct deposit ACH credits, such as payroll, get the payee’s authorization.
The bank accounts may be a designated merchant account, a checking account, or a savings account.
Standard Next Day or Same Day ACH
Nacha is the ACH Operator to which the ODFI submits ACH transaction files.
The Automated Clearing House lets payers choose either standard next-day ACH processing (which may take one to three business days) or faster Same Day ACH processing for ACH settlement. Same Day ACH uses three time windows with Nacha cut-off times, depending on when ACH transactions are submitted to the ACH Operator by the ODFI on behalf of the originator. Next Day ACH can be submitted to Nacha by the ODFI throughout the business day, using a fourth scheduling window with a 2:15 a.m. ET deadline.
If Same Day ACH isn’t selected, standard ACH payments may be scheduled for the next business day or two business days away. Effective September 18, 2026, a Nacha rule change requires funds availability at 9 am (RDFI local time) on the settlement date for all non-Same Day ACH credits.
Effective September 17, 2027, Nacha is increasing the per-transaction limit for Same Day ACH to $10 million from $1 million.
How to Make an ACH Payment via the ACH Network
Creating a business environment that supports ACH transfers is simple. Most vendors already accept them, especially online businesses. These B2B payments are secure and reliable. You will first need to decide whether you want the ACH payment option to be single-entry or recurring. A one-time ACH payment can be made as an ACH debit or credit transaction. After you have provided your ACH operator with the vendor’s account information, you will be able to electronically transfer funds to its account.
For vendor payments, as a payer, you must grant the vendor permission to electronically withdraw funds from your account. If it’s going to be a recurring payment (such as a utility bill), you must provide authorization as to the date and the amount of funds that can be withdrawn, and provide your routing number and business bank account number. If the amount differs from one payment to the next, this will be outlined in the ACH enrollment form.
Make website ACH payments: If you purchase items from vendors online, you may be able to make payments via an ACH WEB method versus PayPal. A WEB code is a Standard Entry Class (SEC) code used for transactions authorized over the Internet, in online or mobile transactions.
Use computer or terminal payments: For businesses that normally process payments over the phone or by mail, a virtual terminal or processing service can be used to process ACH payments. The virtual terminal can be accessed via a computer or mobile device. You type in the vendor’s account and routing numbers and initiate the transaction.
How to Accept ACH Payments
If a business wants to start using ACH with customers, you need to partner with a payment processor. You may already have a relationship with a virtual terminal, but are not using the ACH aspect of the platform. There are many different brands and processing solutions on the market, so it helps to know what you need.
You can start by inquiring with your existing service provider if they can enable ACH. This process would include:
- The vendor or merchant services provider that already processes credit card payments
- The bank where the business accounts are kept
- Any accounting software provider (a good one will allow a company to create invoices and accept ACH payments)
Which Businesses Should Use ACH Payment Processing?
Companies of all sizes, including small businesses, should use ACH payment processing and accept ACH payments from customers because it’s easy to use, costs less than other payment methods, and is less risky. Select the best ACH payment processing solutions for your business.
It’s essential to take the time to look at the bigger picture, comparing the cost of the AP staff’s labor and office supplies required to process a check with the cost of using ACH. An ACH can be processed remotely, whereas paper checks must generally be printed and handled by employees (including signers) who are at the office location. From a theft and fraud standpoint, paper checks are much riskier than ACH payments.
The Pros and Cons of ACH Payment Processing
ACH payment processing has benefits and disadvantages.
Pros
Cost Savings
ACH transaction fees for payment processing cost less than other payment options, including paper checks, wire transfers, credit cards, debit cards, and PayPal. ACH payments are inexpensive. A small business can save and improve cash flow by using a merchant account for online ACH payment processing.
Fewer Resources
Because these ACH transactions are electronic, businesses use much fewer resources than with paper checks. They don’t need to purchase paper, ink, use fuel to transport checks, or incur time or labor costs to handle and deposit them. Also, recordkeeping is always smoother with ACH.
Tracking
ACH makes it easier to track income and expenses in checking and savings accounts. With every transaction, banks create an electronic record. Additionally, financial management and accounting tools can be used to access that transaction history.
Easy to Manage
When someone pays by check, a business has to wait for the check to arrive by mail. This slows down cash receipts. ACH streamlines operations. Payments can also get lost or stolen from the mail. If they are received, you need someone to enter them into the system. This check-paying process can be labor-intensive.
Electronic payments always arrive quickly and are automatically entered into the system. There’s no need to forward checks to the bank or enter transactions manually.
Automation
ACH payments can be automated. For businesses or consumers with bills, recurring payments can be set up. Companies can pay service providers on time to take early payment discounts.
Long Distance Payments
ACH can be paid and accepted remotely. Although credit cards sometimes can as well, if a customer doesn’t want to give out that information, ACH is a great alternative.
Cons
Payments Primarily Domestic US
ACH payments are primarily used for senders and recipients within the United States.
Requires Bank Accounts
The ACH payments network requires that both the sender and receiver have bank accounts.
ACH Funds Receipt Not Instant
Unlike real-time payments via RTP or FedNow, ACH payments require verification and batching for each payment window before they are sent to the recipient. Next Day ACH payments may take 1-3 business days to be received.
Requires Sufficient Funds
For an ACH transaction to be successfully processed, the sender must have sufficient available funds in their bank account.
Submissions Must Meet Timing Window Deadlines
ACH file submissions must be received by Nacha within the scheduled window deadlines. If a Same Day ACH is submitted beyond the third window, it will be received as a Next Day ACH transaction.
Only Operates on Business Days
ACH payments are processed only on business days, not on weekends or holidays.
Real-time Payment Networks
Two real-time payment networks are based in the US:
- RTP Network
- FedNow
The Clearing House owns and operates the RTP Network. The Federal Reserve operates the newer FedNow real-time payments system.
Using these instant payment systems is an alternative to Nacha’s ACH network. Although payments between financial institutions via RTP or FedNow settle instantly, returning funds may be more difficult because they process electronic transfers so quickly.
RTP Network
The RTP Network, which launched in November 2017, had an average daily volume of $6 billion as of June 2026, with 142 million transactions totaling $576 billion in the second quarter of 2026. The RTP Network’s per-transaction limit is $10 million.
FedNow
The FedNow Service for real-time payments launched on July 20, 2023. FedNow operates 24 hours/day, including weekends and holidays. FedNow 2025 statistics are: average daily volume of $2.3 billion, with 8.4 million transactions totaling $853.4 billion. FedNow volume will increase as more financial institutions participate. The FedNow transaction limit is $10 million.
ACH Payments vs. PayPal and Cards
Some alternative payment methods to ACH are PayPal, credit cards, and debit cards.
ACH vs. PayPal Transaction Fees
Most vendors prefer WEB ACH payments over PayPal payments due to PayPal’s high transaction fee. Accepting PayPal payments will cost a vendor a certain percentage of the total transaction.
For example, if the PayPal percentage is 2.99%, then PayPal will keep $2.99 for every $100 transaction. With ACH WEB payments, the vendor is likely to pay ACH transaction fees of only $0.20 to $1.50 per transaction as a flat fee, or 0.5% to 1.5% of the transaction value, which is considerably less expensive for large transactions.
ACH vs. Credit Card and Debit Card Differences
For businesses that generally accept payments by credit card, it often costs less to process an ACH transfer with lower ACH fees than credit card processing. Especially if you are collecting recurring payments, savings can add up. Automation only increases the benefit. However, ACH will not give you an approval in real-time like a credit card terminal.
Debit card transactions remove funds from a business account and place them in another account, much the same as an ACH payment. These transaction processes, however, are very different. ACH payments go through the Automated Clearing House, whereas debit card transactions do not.
There is no need for a debit card number with an ACH payment. Instead, four numbers are needed: the routing number and account number of the payer’s checking or savings account and the receiving party’s routing number and account number.
Debit card and credit card transactions are processed using a payment gateway and a card network. They come with high processing fees compared to ACH payments. Merchants pay a percentage of the total transaction as a payment processing fee. The exact amount depends on the transaction size and whether the card was present. Offline pin-based transactions usually are cheaper to process than online pin-based ones. Still yet, offline fees can quickly add up and eat into a merchant’s profit margins.
For example, Stripe pricing is 2.9% plus 30 cents per successful domestic credit or debit card transaction. Stripe international (cross-border) card transactions cost 1% + 30 cents more, plus an additional 1% for any currency conversion. Other processing networks may charge less for paying suppliers with debit cards.
Comparison Table: Wire Transfers vs ACH Transfers
| Wire Transfers | ACH Transfers | |
|---|---|---|
| Cost per transaction | Free or low-cost domestic, up to $50 + intermediary fees for international | $0.20 to $1.50 flat or 0.5% to 1.5% of amount |
| Speed | Instant | Same-Day ACH or 1-3 business days |
| Processing Method | Real-time | Scheduled windows and batches with verification |
| Cancel or Dispute? | No | Yes |
ACH Payment Processing Helps Businesses Scale Efficiently
ACH payment means an electronic payment made from a payer to a payee’s bank account through the Automated Clearing House financial institution network overseen by Nacha. ACH costs less than other payment solutions, including paper checks, wire transfers, debit cards, or credit card transactions.
ACH payment processing is a cost-effective, easy method for vendor bill payments, employee and independent contractor payments, tax payments, consumer payments, and accepting customer payments. ACH is also used for payroll direct deposit.
Tipalti’s scalable finance automation software products for AP Automation and Mass Payments offer ACH as one of 50+ global payment methods for efficiently paying suppliers, royalty recipients, creators, and independent contractors.
