Banking » Guides » What Is An ACH Transfer And How Does It Work?
Advertiser Disclosure This website is an independent, advertising-supported comparison service. The product offers that appear on this site are from companies from which this website receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). This website does not include all card companies or all card offers available in the marketplace. This website may use other proprietary factors to impact card offer listings on the website such as consumer selection or the likelihood of the applicant’s credit approval. This allows us to maintain a full-time, editorial staff and work with finance experts you know and trust. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impacts any of the editorial content on The Smart Investor. While we work hard to provide accurate and up to date information that we think you will find relevant, The Smart Investor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof. Learn more about how we review products and read our advertiser disclosure for how we make money. All products are presented without warranty.

What Is An ACH Transfer And How Does It Work?

An ACH transfer is a bank-to-bank electronic money transfer processed via the ACH network. How long it takes and what are the pros & cons?
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

We earn a commission from our partner links on this page. It doesn't affect the integrity of our unbiased, independent editorial staff. Transparency is a core value for us, read our advertiser disclosure and how we make money.

Table Of Content

An ACH (Automated Clearing House) transfer is one of the most common and popular to receive or send money online as securely as possible.

Keep reading to learn everything about ACH Transfers.

Key Takeaways

  • An Automated Clearing House Transfer, also known more simply as an ACH transfer, represents a bank-to-bank electronic money transfer. You can use this service to send or receive money both from personal and business accounts.
  • Examples of ACH transfers include: receiving your salary from your employer's account to your account, payments to businesses, automatic insurance, and utility payments.
  • Some banks offer their clients ACH transfers for free, while others might charge up to $3 per transfer. It is worth keeping in mind that some financial institutions might charge up to $10 for the same-day transfer.

What Is An ACH Transfer?

An ACH (Automated Clearing House) transfer is a bank-to-bank electronic money transfer processed via the ACH network. For example, you can use ACH transfers to receive or send money from a business or personal bank account.

ACH transfers are often free, usually quick, and more user-friendly than paying a bill with a debit or credit card or writing a check.

Automated Clearing House transfers are processed in 2 ways, which vary in cost and delivery speed: ACH credit transactions and ACH debit transactions.

How Does an ACH Transfer Work?

The ACH online credit transactions enable you to “push” money to accounts at various banks. These accounts belong to either your family members and friends or yourself. On the other hand, ACH debit transactions involve the “pulling” of money from an account.

For instance, when you set up a recurring bill payment, the organization you are paying can pull what you owe them directly from your bank account every month. Debit transfers have to be processed within one day (business day)

This generally happens three times every business day. ACH network processes two types of Automated Clearing House transactions: direct payments and direct deposits.

Social payment applications such as Zelle and Venmo also use ACH when you send money to family and friends. This debit shows who the recipient of the money was, along with the amount. The entity or individual receiving the money registers it in their bank account as an ACH credit.

How to Transfer Money from One Bank to Another
(Photo by Yeti studio/Shutterstock)

Examples of ACH Transfers

You are likely to have more experience with Automated Clearing House than you think.

Businesses and individuals make use of ACH for everyday transactions that include (these are typical examples of ACH transactions):

  • Deposit of your wages directly from your employer to your personal bank account
  • Payments from businesses to suppliers and vendors
  • Automatic payment of bills that are recurring like insurance premiums, HOA (Homeowners Association) dues, and energy bills, you are setting up an Automated Clearing House transaction when you give a voided check to your biller.
  • Money transfers from your physical bank to your online bank.

How Long Do ACH Transfers Take?

An ACH transfer delivery may take several business days (days when the banks are open). A network operator processes ACH transfers in batches only three times a day in contrast to the real-time processing of wire transfers.

Financial institutions like banks may choose to have Automated Clearing House (ACH) credits processed and delivered within one to two business days.

Meanwhile, the ACH debit transactions must be processed and delivered by the next business day (the rules set by NACHA determine these timelines). Upon receiving the money, a credit union or bank may also hold these transferred funds for a certain period, so the total delivery time varies.

NACHA has put a rule in place which ensures that banks can process payments on the same business day the payment is sent. However, it is up to the bank whether it charges you extra for speeding up a payment.

Top Offers From Our Partners

Chase_logo

Promotion:
$300 New Chase checking customers enjoy a $300 bonus when you open a Chase Total Checking® account and make direct deposits totaling $500 or more within 90 days of coupon enrollment.. Expired on 7/24/2024
Chase Overdraft Assist
With Chase Overdraft AssistSM, you won’t be charged an Overdraft Fee if you’re overdrawn by $50 or less at the end of the business day OR if you’re overdrawn by more than $50 and you bring your account balance to overdrawn by $50 or less at the end of the next business day

UpgradeLogo

Fees:
No monthly fees No monthly fees and no overdraft fees. Plus get reimbursed for ATM fees with an active account 
Rewards:
Up to 2% cash back Up to 2% cash back on common everyday expenses for active accounts with monthly $1,000 direct deposit, and up to 1% cash back for other purchases 
Promotion:
$300 Use Promo Code “AXOS300” for a $300 bonus when you apply for a Rewards Checking account
Up to 3.30% APY
to get the maximum rate (up to $50,000) you'll need monthly direct deposits of $1,500 (0.40% APY), 10 transaction on your debit card (+0.30% APY), average daily balance of $2,500 on Axos Invest Managed Portfolio (+1.00% APY), average daily balance of $2,500 on Axos Invest Self Directed Trading Account(+1.00% APY) and make full monthly payment on loans (mortgage, personal and auto) with Axos account (+0.60% APY).

PNC bank logo

Promotion:
Up to $400 Open a new, select Virtual Wallet product and receive $500/$2,000/$5,000 or more in qualifying monthly direct deposits within 60 days to earn a $100/$200/$400 bonus.
Subject to state availability
PNC Virtual Wallet ® is available in AL, AZ, CA, CO, DC, DE, FL, GA, IL, IN, KY, MD, MI, NC, NJ, NY, NM, OH, PA, SC, TX, VA, WI, and WV. Virtual Wallet ® is offered in the state of MO with the exception of the Greater Kansas City area. Product availability may vary based on where you open your account and the Zip code of your primary address.

Promotion:
Up to $4,000 New customers may earn up to $4,000 when they open an eligible HSBC Premier checking account from January 8, 2024 through March 27, 2024 and complete qualifying activities:

• Receive a cash bonus of $1,500 when you deposit or invest $100,000 – $199,999.99

• Receive a cash bonus of $2,000 when you deposit or invest $200,000 – $299,999.99

• Receive a cash bonus of $2,500 when you deposit or invest $300,000 – 499,999.99

• Receive a cash bonus of $3,500 when you deposit or invest $500,000+

• Earn an extra $500 when you set up recurring monthly Direct Deposits totaling at least $5,000 for 3 months
Wealth Products & Advice
Get access to wealth products, insights and advice from an HSBC Financial Professional through HSBC Securities (USA) Inc
Advertiser Disclosure
The product offers that appear on this site are from companies from which this website receives compensation.
Top Offers From Our Partners

Chase_logo

Promotion:
$300 New Chase checking customers enjoy a $300 bonus when you open a Chase Total Checking® account and make direct deposits totaling $500 or more within 90 days of coupon enrollment.. Expired on 7/24/2024
Chase Overdraft Assist
With Chase Overdraft AssistSM, you won’t be charged an Overdraft Fee if you’re overdrawn by $50 or less at the end of the business day OR if you’re overdrawn by more than $50 and you bring your account balance to overdrawn by $50 or less at the end of the next business day

UpgradeLogo

Fees:
No monthly fees No monthly fees and no overdraft fees. Plus get reimbursed for ATM fees with an active account 
Rewards:
Up to 2% cash back Up to 2% cash back on common everyday expenses for active accounts with monthly $1,000 direct deposit, and up to 1% cash back for other purchases 
Promotion:
$300 Use Promo Code “AXOS300” for a $300 bonus when you apply for a Rewards Checking account
Up to 3.30% APY
to get the maximum rate (up to $50,000) you'll need monthly direct deposits of $1,500 (0.40% APY), 10 transaction on your debit card (+0.30% APY), average daily balance of $2,500 on Axos Invest Managed Portfolio (+1.00% APY), average daily balance of $2,500 on Axos Invest Self Directed Trading Account(+1.00% APY) and make full monthly payment on loans (mortgage, personal and auto) with Axos account (+0.60% APY).

PNC bank logo

Promotion:
Up to $400 Open a new, select Virtual Wallet product and receive $500/$2,000/$5,000 or more in qualifying monthly direct deposits within 60 days to earn a $100/$200/$400 bonus.
Subject to state availability
PNC Virtual Wallet ® is available in AL, AZ, CA, CO, DC, DE, FL, GA, IL, IN, KY, MD, MI, NC, NJ, NY, NM, OH, PA, SC, TX, VA, WI, and WV. Virtual Wallet ® is offered in the state of MO with the exception of the Greater Kansas City area. Product availability may vary based on where you open your account and the Zip code of your primary address.

Promotion:
Up to $4,000 New customers may earn up to $4,000 when they open an eligible HSBC Premier checking account from January 8, 2024 through March 27, 2024 and complete qualifying activities:

• Receive a cash bonus of $1,500 when you deposit or invest $100,000 – $199,999.99

• Receive a cash bonus of $2,000 when you deposit or invest $200,000 – $299,999.99

• Receive a cash bonus of $2,500 when you deposit or invest $300,000 – 499,999.99

• Receive a cash bonus of $3,500 when you deposit or invest $500,000+

• Earn an extra $500 when you set up recurring monthly Direct Deposits totaling at least $5,000 for 3 months
Wealth Products & Advice
Get access to wealth products, insights and advice from an HSBC Financial Professional through HSBC Securities (USA) Inc
Advertiser Disclosure
The product offers that appear on this site are from companies from which this website receives compensation.

How Much Does an ACH Transfer Cost?

For ACH credit transfers, banks may charge you a fee of approximately $3 for sending money between accounts that you have at different banks.

However, most of the banks but many offer external funds transfers without any charge at all. Typically, there is no fee to receive them.

Automated Clearing House debit transfer, which includes most of the bill payments and direct payroll deposits, are generally free of cost. There can be an extra fee if you require expedited bill payments.

The following is a comparison of the ACH transfer fees at the leading five biggest banks in the United States of America.

 

Name of the BankACH Transfer FeeProcessing Time
Bank of America$0 for inbound transfers, $3 for standard-time delivery $10 for next-day deliveryThree business days
Wells Fargo$01-3 business days
US Bank$0 for inbound transfers, up to $3 for standard-time delivery3business days
Capital One$0 2-3 business days
Chase$0 1-3 business days

Types Of ACH Direct Deposits

An Automated Clearing House direct deposit is any type of electronic transfer that a government entity or business makes to a consumer.

The types of payments falling in this particular category cover direct deposits of the following:

  • Paychecks
  • Annuity Payments
  • Government Benefits
  • Interest Payments
  • Tax Refunds
  • Employer-Reimbursed Expenses

You are receiving money with ACH direct deposits, whereas when you make an ACH direct payment, you send money (as stated above).

ACH Transfer Benefits And Drawbacks

ACH transfer is conveneint and safe. On the other hand, there are some drawbacks to consider. Here's what to know:

Pros
Cons
Very Convenient
Limited Transfer From Savings
Most ACH Transfers are Free of Cost
Limits on ACH Transfer Amount
Quick Service

Making use of ACH transfers to make person-to-person payments or paying your bill has benefits galore beginning with convenience.

 Paying your utility bill, mortgage, or any other monthly expenditure via an electronic ACH payment is less time consuming and easier than writing and then mailing a check.

Not to mention, you can also save yourself some money by not spending anything on stamps! Moreover, an Automated Clearing House payment is more secure than any other kind of payment.

Another advantage of ACH transfers is that depending on the type of transfer involved and where you bank, these transfers are usually free of cost!

For instance, your bank might not charge you anything to transfer money from your checking account to another account at a different bank.

Even if it does charge you a fee, it would be a nominal amount (merely a couple of dollars!).

Top Offers From Our Partners

UpgradeLogo

Savings Rate: 5.21% APY
Minimum Deposit:
$0
 
CIT-Bank-Logo
Savings Rate: 4.45% APY
Minimum Deposit:
$5,000
Quontic bank logo
Savings Rate: 4.50% APY
Minimum Deposit:
$100
 
Advertiser Disclosure
The product offers that appear on this site are from companies from which this website receives compensation.

Receiving and sending ACH payments is usually swift.

As mentioned earlier, funds transfer from one bank to another through the ACH network usually takes place the next business day post the initiation of the transaction.

Federal Reserve Regulation D governs savings accounts, and it limits certain kinds of withdrawals to 6 per month.

If you cross this limit with several Automated Clearing House transfers from savings to another bank, the bank can impose an excess withdrawal penalty on you.

Moreover, the bank might convert your savings account to a checking account if regular transfers from savings become a routine practice.

Most of the banks impose limits on the amount of money you can send through an ACH transfer. There might be daily limits, per-transaction limits, and weekly or monthly limits.

There may be one limit for transfers to other banks and another for bill payments.

Similarly, one ACH transaction type might be unlimited, but another might not. Banks may also enforce limits on where you can send the money to.

As a case to point, the banks might not allow international transfers.

Is ACH A Wire Transfer?

Wire transfer and ACH transfer are both bank-to-bank payment methods that you can use to send money electronically from one account to another.

You can also use both of these methods for several business-to-business payments like affiliate payments, vendor payments, or supplier payments. However, there are a couple of inherent differences between these two payment methods.

Here is a table that details how to wire transfer stacks up against ACH transfer.

ACH Transfer
Wire Transfer
Certainty and Safety
ACH transfers are quite secure and safe. However, these transfers into your bank account can be reversed
Wire transfers are also a safe way to receive payment, and you cannot fake them, unlike a cashier's check.
Transfer Speed
Generally takes 2-3 business days to complete
Wire transfers move money from one bank to another one within one business day
Cost
These are usually free for customers. This is especially true if you are receiving funds in your bank account.
Credit Unions and banks usually charge in the range of $10-35 to send a wire transfer with the USA. International transfers tend to be more expensive

ACH Transfer Alternatives

Apart from wire transfer, another great alternative to ACH transfers for transferring money between different banks is to make use of a personal payment app.

  • Apps (Paypal, Venmo)– For example, apps such as Paypal and Venmo make it easier for individuals to send money to their colleagues and family. These apps transfer money from your account into a digital wallet
  • Zelle – An even better option is using Zelle, which is a digital payments network, and allows several bank customers to transfer money directly between bank accounts. People can use these systems to transfer money to someone else as well as move money between two accounts owned by the same individual.

A great advantage of these systems is that they are very swift (sometimes even quicker than ACH transfers!). This is particularly true for payment networks such as Zelle, which move money from one account to another directly. Moreover, these payment options are very economical to use (many of them are free of cost).

Bottom Line

To summarize, ACH transfers are a very expedient way to move funds from one account to another one without the involvement of cash.

This payment method is also a very convenient way to pay your bills, such as utilities and rent, by allowing the receiving party to pull the funds from your bank account directly.

You just need to ensure that you comprehend your bank’s policies for ACH direct payments and direct deposits. (This is particularly important if you are the one sending the funds.

It always helps to be aware of important limitations such as amount limits, a fee for inadequate funds transfer limits for savings accounts and so forth).

This will help you steer clear of any fees, unexpected delays in processing and potential limits so that you may make the most out of the ACH transfer service.

Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Search
Banking Reviews
Best Banking Accounts
Savings Accounts
Top Offers From Our Partners

UpgradeLogo

Savings Rate: 5.21% APY
Minimum Deposit:
$0
 
CIT-Bank-Logo
Savings Rate: 4.45% APY
Minimum Deposit:
$5,000
Quontic bank logo
Savings Rate: 4.50% APY
Minimum Deposit:
$100
 
Advertiser Disclosure
The product offers that appear on this site are from companies from which this website receives compensation.
Top Offers From Our Partners

Chase_logo

Promotion:
$300 New Chase checking customers enjoy a $300 bonus when you open a Chase Total Checking® account and make direct deposits totaling $500 or more within 90 days of coupon enrollment.. Expired on 7/24/2024
Chase Overdraft Assist
With Chase Overdraft AssistSM, you won’t be charged an Overdraft Fee if you’re overdrawn by $50 or less at the end of the business day OR if you’re overdrawn by more than $50 and you bring your account balance to overdrawn by $50 or less at the end of the next business day

UpgradeLogo

Fees:
No monthly fees No monthly fees and no overdraft fees. Plus get reimbursed for ATM fees with an active account 
Rewards:
Up to 2% cash back Up to 2% cash back on common everyday expenses for active accounts with monthly $1,000 direct deposit, and up to 1% cash back for other purchases 
Promotion:
$300 Use Promo Code “AXOS300” for a $300 bonus when you apply for a Rewards Checking account
Up to 3.30% APY
to get the maximum rate (up to $50,000) you’ll need monthly direct deposits of $1,500 (0.40% APY), 10 transaction on your debit card (+0.30% APY), average daily balance of $2,500 on Axos Invest Managed Portfolio (+1.00% APY), average daily balance of $2,500 on Axos Invest Self Directed Trading Account(+1.00% APY) and make full monthly payment on loans (mortgage, personal and auto) with Axos account (+0.60% APY).

PNC bank logo

Promotion:
Up to $400 Open a new, select Virtual Wallet product and receive $500/$2,000/$5,000 or more in qualifying monthly direct deposits within 60 days to earn a $100/$200/$400 bonus.
Subject to state availability
PNC Virtual Wallet ® is available in AL, AZ, CA, CO, DC, DE, FL, GA, IL, IN, KY, MD, MI, NC, NJ, NY, NM, OH, PA, SC, TX, VA, WI, and WV. Virtual Wallet ® is offered in the state of MO with the exception of the Greater Kansas City area. Product availability may vary based on where you open your account and the Zip code of your primary address.

Promotion:
Up to $4,000 New customers may earn up to $4,000 when they open an eligible HSBC Premier checking account from January 8, 2024 through March 27, 2024 and complete qualifying activities:

• Receive a cash bonus of $1,500 when you deposit or invest $100,000 – $199,999.99

• Receive a cash bonus of $2,000 when you deposit or invest $200,000 – $299,999.99

• Receive a cash bonus of $2,500 when you deposit or invest $300,000 – 499,999.99

• Receive a cash bonus of $3,500 when you deposit or invest $500,000+

• Earn an extra $500 when you set up recurring monthly Direct Deposits totaling at least $5,000 for 3 months
Wealth Products & Advice
Get access to wealth products, insights and advice from an HSBC Financial Professional through HSBC Securities (USA) Inc
Advertiser Disclosure
The product offers that appear on this site are from companies from which this website receives compensation.

Table of Contents