If you’ve ever received a direct deposit or paid for something online, you’ve participated in an ACH transfer.
You may be eager for the payment to process, especially if you’re receiving funds, but transfers don’t happen automatically. They may occur same-day or they can take several business days. Banks like Wells Fargo and Chase state that transfers typically take two to three business days to complete.
An ACH transfer is the electronic transfer of money through the Automated Clearing House Network. The ACH transfer system actually predates the internet, dating back to 1974. It was created and is administered by National Automated Clearing House Association (NACHA).
Payments are funneled either through the U.S. Federal Reserve or The Clearing House, a private company owned by major commercial banks.
ACH credits, or “push” transactions, allow you to receive funds like wages, tax refunds, social security payments, and more. An originator initiates a transaction to the Receiving Depository Financial Institution (RDFI) account, which is then credited.
You can use ACH debits, or “pull” transactions, to make payments or send money, whether it’s to pay a bill, purchase a product or service, send money to family or friends, or make a tax or tuition payment. In a “pull” transaction, the originator pulls funds from the receiving bank account (often a checking account), which is then debited.
According to the Consumer Financial Protection Bureau, some ACH payments can take several days to complete because of the way they’re processed and the precautions that are in place against fraud and money laundering.
The FedACH network and NACHA process funds same-day and future dates. They have three submission cutoff times for same-day transactions with corresponding same-day settlement windows. They have five submission cutoff times for future dated transactions, all of which have an 8:30 am ET settlement schedule for the next banking day or the scheduled settlement date.
While there are multiple submission and settlement opportunities, banks can choose how many times per day they submit batches of transactions to be processed. Even if they submit transactions that are processed the same day, the receiving bank can hold the funds, meaning that the money won’t be released into your account yet.
While ACH transfers may take multiple business days to process, the speed of ACH processing is continuously improving. Nacha, which created and enforces the rules for the ACH network, implemented same-day ACH payments in 2016 and they expanded their same-day processing window on March 21, 2021.
ACH transfers are a complicated, multi-step process.
Given this lengthy process, it makes sense that it may take several days for them to clear.
Reversals can be made for specified reasons: if there was an incorrect account number or dollar amount; in the case of a duplicate transaction; or in cases where the date is wrong and the credit was later or the debit earlier than intended.
ACH transfers allow for quicker transactions. However, it’s important to understand both their benefits and limitations.
ACH transfers only work within the United States, whereas wire transfers of more than $15 can be made internationally, but you’ll have to pay a fee (typically $10 to $35) for each wire transfer.
One of the primary differences between these two money transfers involves timelines. Wire transfers are real-time transactions, which is a good thing if you need to transfer money fast. However, you can’t cancel wire transfers once initiated. You can reverse ACH transactions under certain circumstances.
Most of us use ACH payment processing instead of other payment options like paper checks. It’s a convenient, cost-effective way of transferring funds electronically that you can access remotely from almost anywhere. It doesn’t work as fast as a wire transfer, but you can still get or send money quickly with the option of reversing a transaction if there’s an error or fraudulent activity or stopping a transaction three days before the scheduled payment date. These options are not available with a wire transfer.
It’s important to remember that ACH transfers may take a few business days to process and the timeline can vary from bank to bank.
Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Counselor® and a Bilingual Personal Finance Writer and Educator dedicated to helping populations that need financial literacy and counseling. Her informative articles have been published in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal financial and motivational site www.AcetheJourney.com and translated into Spanish the book, Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English personal finance courses on behalf of the W!SE (Working In Support of Education) program has taught workshops for nonprofits in NYC.
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