ACH (Automated Clearing House) is a US electronic funds transfer network, governed by Nacha operating rules, that moves money between bank accounts in batches. It handles both credits, where the sender pushes money, and debits, where the receiver pulls it with authorisation.
Why it matters
ACH is the standard way American employers pay salaries by direct deposit and how many businesses collect recurring payments or pay vendors. It is cheaper than cards for large or regular payments but slower: standard transfers usually take one to a few business days, and faster options such as same-day ACH exist. Returns can arrive days after a debit, for example for insufficient funds or an unauthorised claim, so merchants cannot treat a debit as final immediately. Other countries have comparable systems, such as BACS in the UK, SEPA in Europe and NACH in India.
Example
Routing number: 021000021 (identifies the bank)
Account number: 000123456789
Type: Checking
Authorisation: Signed direct-debit mandateThe originator submits a debit file, the receiving bank checks it against the account and the mandate, and funds settle in the next processing window.
Common mistakes
- Assuming a pending debit is guaranteed.
- Collecting bank details without proper authorisation.
- Mixing up the routing number with the account number.
Rules vary by country; this entry is a definition only.
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