ACH (Automated Clearing House)
The Automated Clearing House (ACH) is an electronic network that processes financial transactions in batches across U.S. banks. It handles direct deposits, bill payments, business-to-business payments, and government transfers — moving trillions of dollars annually.
Automated Clearing House Definition
The Automated Clearing House (ACH) is an electronic network that processes financial transactions in batches across U.S. banks. It handles direct deposits, bill payments, business-to-business payments, and government transfers — moving trillions of dollars annually.
Automated Clearing House in Practice
A small business sets up payroll through ACH. Every two weeks, the payroll system sends a batch of payment instructions to the ACH network. Each employee's bank receives the funds, and paychecks land in accounts by morning — no paper checks needed, no processing fees per employee.
Why It Matters
ACH is the backbone of routine payments in the U.S. It's cheaper than wire transfers (often free or under $1), more efficient than paper checks, and handles everything from your mortgage payment to your Netflix subscription.
For businesses, ACH reduces payment processing costs dramatically compared to credit cards. Accepting ACH payments instead of cards can save 2-3% per transaction — which adds up fast at scale.
FAQ
Q: How long do ACH transfers take?
A: Standard ACH takes 1-3 business days. Same-day ACH is available for an additional fee and settles within hours.
Related Terms
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