What is an ACH Transfer and How It Works

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ACH transfers are frequently used to send and receive money electronically. If you receive direct deposits, make electronic payments or use your bank’s online bill payment service, chances are you’ve heard this term used often. But maybe you aren’t quite sure how ACH transfers work.

This guide breaks down the two types of ACH transfers, processing times and restrictions you should be aware of. You’ll also discover another convenient way to send money online.

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What Is an ACH Transfer?

An ACH (Automatic Clearing House) transfer is used to move money electronically between banks and credit unions.

How Does an ACH Transfer Work?

Most banks allow you to initiate ACH transfers to individuals and businesses with external accounts, whether you’re sending money to a relative or friend or paying a bill. You can also receive funds from others through ACH transfers, like employer direct deposits, business payments and government benefits.

Types Of ACH Transfers

ACH Debit Transactions

These transactions pull money from accounts and include bill payments and incoming direct deposits from your employer.

ACH Credit Transactions

These transactions push or send money to accounts at other financial institutions. For example, you can initiate credit transactions to move funds to another account you own or to an account that belongs to a relative or friend. Payroll or direct deposit transactions are also classified as ACH credit transfers. 

How Long Do ACH Transfers Usually Take?

It depends on the type of transaction. ACH debit transactions are processed the following business day per the National Automated Clearinghouse Association (NACHA) guidelines. However, ACH credits could take up to two business days, depending on the financial institution. 

How Much Does An ACH Transfer Cost?

Most ACH debit transactions are free, but you could pay a fee of up to $3 to initiate an ACH credit transaction. 

Wire Transfer vs. ACH Transfer

Wire transfers are processed in real-time, which means the funds are sent right away. In some instances, they’re available in just a few hours or even minutes. However, this service comes at a cost, as you can expect to spend $20 to $30 on average for wire transfers. 

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Restrictions On ACH Transfers

Amount Limits

Some banks and credit unions limit how much you can move between accounts daily or monthly. 

Cut-off Times

There are usually cut-off times each day for ACH transfers. You’ll typically have to wait until the next business day for the transaction to process. 

Fee For Insufficient Funds

You could be charged an NSF fee if the amount you’re attempting to transfer exceeds the available balance in your bank account. 

Availability

ACH transfers are generally limited to banks and credit unions located in the U.S. So. You’ll need to explore other options for international transfers. 

Transfer Limits

If you initiate more than six transfers per month, you could be charged a fee.

Processing and Posting Times

Processing and posting times vary by financial institution. Some process ACH credit transfers and post them the same business day, and others take a few business days or longer. However, NACHA guidelines require ACH debit transfers to be processed within one business day. 

Are There Other Ways To Send Money Online?

ACH transfers aren’t the only way to send money online. You can open an online checking account with Current, a financial technology platform, and receive instant deposits from your bank account. With Current Pay, you can send or request money instantly to other Current members without any transfer fees. 

Current also features several other enticing perks for account holders, including early payroll deposits up to two days faster, generous cash-back rewards and returns on your money, overdraft protection (limited to $200) with no overdraft fees and more.

You can get started with Current by visiting its website and downloading the mobile app on your Google Play or the AppStore. It only takes two minutes of your time, and you’ll be well on the way to enjoying an upgraded online banking experience.

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