Home Glossary Terms ACH

ACH (Automated clearing house)

An ACH is a computer-based intermediation between transacting financial institutions. It is designed in the form of an electronic network that processes financial transactions, mainly payments between ordering customers and beneficiaries.

The transactions processed through ACH are mainly high-volume but low-value payments. For this reason, the fees charged are low. There are two main types of ACH payments: credit transfers and direct debits.

ACH credit transfers refer to a mode of payment when the payer instructs his payment provider to debit the amount stated on the order from his account and credited to the beneficiary.

On the other hand, direct debits refer to a type of ACH payment service where the beneficiary issues the payment order to his payment service provider based on a prior approval given to him by the payer.

ACH transfers are submitted in cycles throughout the day. When your payment comes after the cutoff time, it will be processed in the next cycle. When paying for your transfer, some money remittance providers accept ACH as a payment method together with others like debit cards and credit cards.

Read our ACH vs Wire Transfer guide, to lear more about ACH.

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