What Are ACH Payments?
7 Min Read | Last updated: August 6, 2026
Automatic Clearing House (ACH) payments are electronic transfers between banks and credit unions. Learn how they can work for you.
At-A-Glance
- Automatic Clearing House (ACH) payments are electronic transfers between banks and credit unions that are made through the Automated Clearing House network.1
- Banks may be able to clear payments in as quickly as one day or a few hours.2
- The difference between an ACH direct deposit and an ACH direct payment is the direction the money is going.
Electronic funds transfers made between financial institutions like banks and credit unions are often conducted using the Automated Clearing House (ACH) network, which provides a fast, secure, and easy way to transfer funds.1 Read on to learn more about how ACH payments work.
What Is an ACH Transaction?
Banks in the U.S. use a nine-digit routing number and an account number to create a unique identifier for their customer’s checking accounts. Those numbers are used to send and receive funds on the Automated Clearing House Network.3 Think of it as using an “electronic check” to make a payment to someone else’s bank account.
ACH payments may take about two business days to process, but some banks can clear an ACH payment within one business day or even hours.2 The exact details of this are something you’ll want to discuss with your bank because every institution is different.
ACH is used for domestic transfers. With wire transfers, you may transfer funds internationally. These are sometimes called “remittance transfers.”1 Ask your local bank or financial institution about them first, because they are not always available.
ACH Transactions: Direct Deposit vs. Direct Payments
ACH transactions are bank-to-bank transfers that can go in either direction. A good example of an ACH transaction is the electronic transfer of a paycheck. The recipient receives that transfer as an “ACH credit,” also known as a “direct deposit.”2,4
The differentiator between a direct deposit and a direct payment is the direction the money is going. Direct deposit is the receipt of funds from someone else. A direct payment is the sending of funds. Many Americans use ACH direct payments for bill payments through their bank or credit union.5 The chart below might help you to better understand this.
Be careful about substituting the term “ACH payment” for “direct payment.” They are not the same thing. An ACH payment can be either a credit or debit. It’s a descriptive term used for all ACH transactions.2 A direct payment is an ACH payment that goes out, like online bill pay.5
| Type of ACH | Fund Flow Direction | Example |
|---|---|---|
| Direct Deposit | Incoming (Pushed) | Payroll |
| Direct Payment | Outgoing (Pulled) | Bill Pay |
How to Initiate ACH Transactions
Most modern banks and credit unions have an option on their website to initiate ACH transactions. Account holders may be able to log in, enter the account number and routing number of where they want to send money, and then authorize the ACH payment. Of course, this process may vary depending on which bank you use, so be sure to get clarification from your financial institution if you need further guidance.
Double-check the account number and routing number of the intended recipient before giving the final authorization for your ACH payments.
Writing the wrong numbers could cause your transaction to be delayed, denied, or even posted to the wrong account. Ideally, the bank will catch it before that happens, but if not, the funds may end up deposited in the wrong account. If that happens, you’ll need to contact your financial institution to try to resolve the problem.6
Benefits and Drawbacks of ACH Payments
| Benefits |
|---|
| Convenience: ACH Payments offer a convenient form of money transfer. |
| Accuracy: ACH transfers go from one bank account into another, helping to ensure that the proper party receives the funds. |
| Cost: The cost of an ACH varies as there may be fees.7 |
| Security: ACH transactions are initiated by banks and credit unions use security protocols to prevent fraud.8 |
| Potential Drawbacks |
|---|
| Bank-imposed amount limits: Your bank or credit union may have an amount limit on ACH transactions.8 |
| Potential payroll fraud: Theft of bank account numbers and routing numbers could lead to payroll fraud. |
Frequently Asked Questions
Payroll direct deposits and automatic recurring payments (debits for services like utilities) are all examples of ACH payments.5
The maximum amount you can send per day via ACH may vary by financial institution.8
The Takeaway
ACH payments can be a safe and effective way to electronically transfer money from one bank account to another. Processing time for a domestic ACH payment to clear is the same business day but may take up to two business days.2 Check with your local bank or credit union for more details.
1 "Money transfer frequently asked questions," Consumer Financial Protection Bureau
2 "ACH Payments Fact Sheet," Nacha
3 "Routing Number vs. Account Number: What's the Difference?," Experian
4 "Federal Reserve Board - Automated Clearinghouse Services," Board of Governors of the Federal Reserve System
5 "Meet Your Money’s Superpowers: Direct Deposit & Direct Payment!," Nacha
6 "I sent money to someone and they couldn't get the money because the information didn't match what I provided. What can I do?," Consumer Financial Protection Bureau
7 "Network Administration Fees," Nacha
8 "What is an ACH transaction?," Consumer Financial Protection Bureau
Kevin D. Flynn is a financial services provider, business coach, and financial writer. He lives in Leominster, Massachusetts with his wife Evelyn, two cats, and ten wonderful grandchildren.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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