written by khatabook | December 21, 2022

Your Complete Guide to ACH (Automated Clearing House) Payment

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Table of Content


An ACH payment is an electronic payment made through the ACH network. ACH stands for Automated Clearing House, which is a network that processes electronic payments and direct deposit transactions. ACH payments are typically used for recurring payments, such as bills, subscriptions, and membership fees. They can also be used for one-time payments, such as for online purchases. To make an ACH payment, you will need the recipient’s bank account number and routing number. You will also need to provide your bank account number and routing number to the payee. The payment will then be processed through the ACH network and will typically post to your account within 1-2 business days. There are several benefits of using ACH payments. They are convenient and efficient, and typically have lower fees than other types of electronic payments, such as credit cards or wire transfers. ACH payments are also very safe and secure.

Did You Know? Payroll, benefits and tax return deposits are all examples of direct deposits. Direct payments include money leaving an account, such as bill payments or sending money to someone else. 

What are ACH Payments?

An ACH payment is an electronic payment made through the Automated Clearing House network. ACH payments are typically used for recurring payments, such as utility bills or loan payments, but can also be used for one-time payments. When an ACH payment is initiated, the payer's bank account is debited and the payee's bank account is credited. The funds typically become available to the payee within one to two business days.

ACH payments are convenient for both payers and payees. For payers, they eliminate the need to write and mail paper checks. For payees, they provide a more efficient way to receive payments. ACH payments are typically less expensive than other types of electronic payments, such as credit card payments. This is because ACH payments are processed in batches, which reduces the fees associated with each transaction. To make an ACH payment, you will need the payee's bank account number and routing number. You will also need to provide your bank with authorization to debit your account.

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How do ACH Payments work?

In India, ACH payments are processed by the National Electronic Clearing System (NECS). NECS is a centralized clearing system that facilitates the interbank clearing of electronic payments. It is operated by the Reserve Bank of India (RBI) and is available to all banks and financial institutions in India. ACH payments are typically used for recurring payments, such as utility bills, loan repayments, and salary payments. They can also be used for one-time payments, such as tax payments.

To make an ACH payment, the payer must first provide their bank with the necessary information, such as the payee's bank account number and routing number. The payer's bank will then initiate the payment and send it to the payee's bank through the NECS. The payee's bank will then credit the payee's account with the amount of the payment. The entire process usually takes 2-3 days to complete.

Types of ACH Payments

There are four types of ACH payments:

ACH Credit

This type of ACH payment is used to send money from one account to another. When you make an ACH credit payment, the money is withdrawn from your account and deposited into the recipient’s account.

ACH Debit

This type of ACH payment is used to pay for goods or services. When you make an ACH debit payment, the money is withdrawn from the recipient’s account and deposited into your account.

ACH Transfer

This type of ACH payment is used to transfer money between two accounts. When you make an ACH transfer, the money is withdrawn from one account and deposited into the other account.

ACH Return

This type of ACH payment is used when an ACH payment is returned to the sender. When an ACH payment is returned, the money is withdrawn from the recipient’s account and deposited into the sender’s account.

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Benefits of ACH Payments

There are many benefits of ACH payments. Some of the most notable benefits include:

ACH payments are convenient 

ACH payments can be made directly from your bank account, and you can set up recurring payments so that you don't have to remember to make a payment each month.

ACH payments are typically cheaper 

When you make a payment with a credit or debit card, the merchant is charged a fee by the card issuer. With ACH payments, the bank typically charges the merchant a lower fee.

ACH payments are safe and secure 

When you make an ACH payment, your bank account information is encrypted and transmitted securely.

ACH payments are faster 

With ACH payments, the funds are typically transferred within one to two business days.

ACH payments can be used to pay bills 

In addition to paying bills, you can also use ACH payments to make other types of payments, such as rent payments, mortgage payments, or loan payments.

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Why are some ACH payments rejected?

There are a few reasons why an ACH payment might be rejected:

 Insufficient funds

This is the most common reason for a payment to be rejected. If there are not enough funds in the account to cover the payment, the bank will reject the transaction.

Invalid account number

 If the account number is entered incorrectly, the payment will be rejected.

Invalid routing number

The routing number is the nine-digit code that identifies the bank and the account. If the routing number is entered incorrectly, the payment will be rejected.

 Closed account

 If the account is closed, the payment will be rejected.

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 Unauthorised transaction

 If the account holder did not authorise the transaction, the payment will be rejected.

Fraud

 If the bank suspects that the transaction is fraudulent, the payment will be rejected.

Conclusion

An ACH payment is a type of electronic funds transfer (EFT) that is used to send money from one bank account to another. ACH payments are typically used for recurring payments, such as utility bills or mortgage payments. They can also be used to send one-time payments, such as tax refunds or insurance premiums. ACH payments are processed through the ACH network, which is a nationwide system that clears and settles electronic transactions. ACH payments are typically processed within one to two business days. 

There are a few things to keep in mind when making an ACH payment. First, you will need the recipient’s bank account number and routing number. Second, ACH payments are not instant, so you will need to make sure the payment is sent a few days before it is due. Finally, ACH payments can be reversed, so you should always confirm that the payment has been processed before you send it. If you are making an ACH payment for the first time, it is a good idea to contact your bank or credit union to find out more about the process.

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FAQs

Q: Do Indian banks support ACH?

Ans:

Yes, Indian banks support ACH. ACH is an electronic network that processes large volumes of credit and debit transactions for participating financial institutions. ACH transactions are typically initiated by businesses and consumers for the purpose of making payments or transferring funds. Indian banks typically use ACH to process payroll direct deposit transactions, Social Security and other government benefit payments, and tax refunds. Many businesses also use ACH to make payments to vendors, suppliers, and other business partners.

Q: What are the risks of ACH payments?

Ans:

There are a few risks associated with ACH payments. One is that if there is an error with the payment, it can take a few days to correct. This can be an issue if the payment is for something like rent or a mortgage payment. Another risk is that if your bank account is compromised, someone could theoretically steal money from your account via an ACH payment. Finally, if you are using ACH to pay bills, there is always a risk that the biller could make an error when processing your payment.

Q: What are the benefits of ACH payments?

Ans:

ACH payments are typically faster and more convenient than traditional payments, such as checks or money orders. They can also be less expensive, since they often have lower transaction fees.

Q: How do ACH payments work?

Ans:

ACH payments are made through the ACH network, which is a network of financial institutions that process electronic payments. ACH payments are typically made between two financial institutions, but can also be made between a financial institution and a business or individual.

Q: What is an ACH payment?

Ans:

An ACH payment is an electronic payment made through the ACH network. ACH payments are typically used for recurring payments, such as bills or subscriptions.

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The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.