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What is an ACH Transfer and How It Works

Written by Marc Guberti

Marc Guberti is a Certified Personal Finance Counselor who has been a finance freelance writer
for five years. He has covered personal finance, investing, banking, credit cards, business
financing, and other topics.
Marc’s work has appeared in US News & World Report, USA Today, Investor Place, and other
publications. He graduated from Fordham University with a finance degree and resides in
Scarsdale, New York.
When he’s not writing, Marc enjoys spending time with the family and watching movies with
them (mostly from the 1930s and 40s). Marc is an avid runner who aims to run over 100
marathons in his lifetime.

Updated February 14, 2024​

4 min. read​

what is an ach transfer

Digitized banking has simplified the customer experience. Direct payments are easier and give people an easier way to exchange money. These payments rely on the ACH network to process. 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, you may have heard of ACH payments. We can take this payment system for granted, but it’s useful to understand how ACH transfers work.

This guide breaks down the two types of ACH transfers, processing times and restrictions. Knowing these nuances can give you more confidence in the ACH system and help you understand a viable and convenient backup option 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. Money goes out of one account and enters another account based on prearranged agreements. Consumers may have to use money transfers to send funds to merchants. For example, consumers often use ACH payments to cover utility bill payments and transfer money. This may sound complicated, but it happens seamlessly with every purchase without any additional work.

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 transfers are a significant component of finance, but we only have two types of ACH transfers available. Fewer choices make it easier to understand how a national automated clearing house ACH network handles transactions.

ACH Debit Transactions

These transactions pull money from accounts and include bill payments and incoming direct deposits from your employer. Your employer will need to know your account number and bank routing number to send money to your account.

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?

The processing time for an ACH transfer 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.

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How Much Does an ACH Transfer Cost?

Most ACH debit transactions are free, but you may have to pay a fee of up to $3 to initiate an ACH credit transaction. This fee is rare, and if it shows up in your finances, you may want to switch to another bank that won’t charge you. Online banks and neo-banking companies have caught up to traditional banks, offering many of the same features. However, most traditional banks charge additional fees and have lower interest rates on savings accounts.

Wire Transfer vs. ACH Transfer

Wire transfers are processed in real-time, which means you will receive funds sent right away. In some instances, they’re available in just a few hours or even minutes. Receiving funds right away can help you address overdraft fees or collect more interest. However, this service comes at a cost that can feel excessive, even if you have a savings account with a 4% interest rate.

You may have to spend $20 to $30 for wire transfers, which can quickly add up if you use them frequently. However, waiting a little longer for an ACH transfer will save you $20 to $30 each time. In comparison, ACH transfers only take 1-3 business days to process. So, while it’s not overnight delivery for small business owners and consumers, you still receive funds quickly through the Automated Clearing House.

Restrictions On ACH Transfers

ACH transfers present numerous advantages, but it’s important to keep their limitations in mind. Knowing their limits and rules will help you anticipate how long it will take for the money to arrive. These details can also help you avoid fees attributed to a low bank account balance, insufficient funds, and other factors.

Amount Limits

Some banks and credit unions limit how much you can move between accounts daily or monthly. For example, many banks limit you to $10,000 to $25,000 per month of funds you can move between accounts, but some banks have higher limits. If you have issues with your account limits, reach out to your bank and see if they can raise your maximum monthly ACH transfers. You may want to switch to another bank if you are not pleased with the amount limits and have already tried calling your institution.

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Cut-off Times

There are usually cut-off times each day for ACH transfers. Missing the cut-off time will increase the amount of time it takes to receive the funds. You’ll typically have to wait until the next business day for the transaction to process. ACH transfers occur at five intervals each day: 6 am, 12 pm, 4 pm, 5:30 pm, and 10 pm Eastern.

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. Some banks offer additional coverage that reduces the likelihood of receiving an insufficient funds fee. Tracking your expenses can also minimize the amount of money that leaves your bank account. If you have not checked your expenses for years, this activity can help you save considerable money. Many people continue paying for several subscriptions that they no longer use. Every canceled subscription or reduced expense adds more money to your pocket and protects you from NSF fees.


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

Transfer Limits

You may have heard about getting charged a fee after making more than six transfers from your savings account within 30 days. While this has been true for a while, it’s hit murky waters recently. The Federal Reserve announced changes to Regulation D that no longer limit people to six transfers per month from their savings accounts. Despite the Fed making this sweeping change to how savings accounts can work, some banks still cap you to six transfers per month on your savings account. Check with your bank to discover their transfer limits. You may have to abide by the six transfers per month rule, or you may be with a bank that has updated its policies based on the Fed’s decision with Regulation D.

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Processing and Posting Times

Processing and posting times vary by each 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 App Store. It only takes two minutes to set up a Current account and take your finances to the next level. Then, you’ll be well on the way to enjoying an upgraded financial management experience.

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