The world of online banking and digital finance grows more extensive and complex each day. This means independent consumers have much more control over their money, and more options for banking. But it can be more complicated to manage your finances. How do you determine the best way to send and receive funds as an individual or business? 

One of the most common, modern ways to move money is through an ACH (Automated Clearing House) transfer. Keep reading to learn everything you might need to know about the pros, cons, and general application of ACH transfers.

What is an ACH transfer?

An Automatic Clearing House Transfer is pushing or pulling funds from online accounts. It’s a massive network that allows money to move seamlessly from bank to bank, from account to account. Have you used any kind of online bill pay service, direct deposit for employment, or paid a friend for lunch using Venmo? Those are all examples of ACH transfers in action. 

Nerdwallet shares that ACH Transfers fall into two categories:

Debit
Money is “pulled” or debited from your account. For example, you may set up an electricity bill to be automatically debited from your account each month.
Credit
Money is “pushed” or credited from your account. You may send friends and family money for reimbursement or gifts, make payments on existing debts such as credit cards, or you may send money to particular savings accounts.

ACH Transfers have rapidly replaced checks and cash for money management in the last decade, due to convenience, cost, accessibility, and security. But we’ll get into the pros of ACH transfer in just a minute.

How to do an ACH transfer

Nearly all banks and financial institutions offer free ACH transfers as a part of their platform. Some may partner with third party organizations such as Zelle or Popmoney, or they may offer their own ACH functionality as a bank.

  1. Check your bank: Peruse your banking website for “automatic transfers,” “bill pay,” or other terms that indicate moving money between online accounts. Most will have these featured prominently on home pages and opening screens. 
  2. Determine details:Do you need the account numbers of where you’re sending the money? Name of the bank? Online ID of the user? Can you set up your ACH transfer to be recurring and automated, such as a monthly electric bill or savings account? Do you want a reminder via email each month when the credit or debit is completed? 
  3. Download apps: An ACH transfer can be even faster when its two swipes away on your phone. Banking apps or individual ACH money transfer platforms like Venmo, Paypal, Zelle, and others can stand ready on your home screen for transfers and money monitoring. 
  4. Read the fine print: ACH transfers are usually completed a few times a day – on business days. Be sure to read the fine print on the information needed for ACH transfer and how long you can expect it to take before your money is moved to the desired account.
  5. Click! It’s that simple: Type in the amount and where you want to send/receive funds and let the ACH transfer do the rest.

How to cancel an ACH transfer

What happens if you accidentally send the wrong amount – or to the wrong party? There is usually a window of time during which you can cancel or reverse an ACH transfer. ACH Transfers take between 1-3 business days to process, so often if you catch it before the transfer has processed completely you can click a button or link to “cancel transfer.” 

Call your bank or the financial institution immediately if you find an error in an ACH transfer and cannot cancel it online – many can find ways to stop the transfer or recover the funds depending on the circumstances.

According to The Balance, the National Automated Clearing House Association, there are three common conditions under which cancelling or reversing an ACH transfer can occur:

  1. Wrong total: if the wrong amount of money is transferred.
  2. Wrong Account: if the funds were sent or received by the wrong party
  3. Duplicate Transfers: sometimes a transaction goes through twice due to error, or both sides of the transaction initiating the same transfer

How long does an ACH transfer take?

Most ACH transfers take 1-3 days to process.

There are a few factors at play to determine how fast your ACH transfer will go through – business days and frequency of processes. Generally, ACH transfers only take place during business hours on business days, so you may have to wait if your transfer was submitted after 5 pm or on a weekend. Many banks & financial companies push ACH transfers at a few set times during a business day, so for example they may process at 10 am, 1 pm, and 4 pm. Once pushed, the receiving end of the ACH transfer will also need to process according to their schedule before the funds are delivered to their end destination.

What does an ACH transfer cost?

Usually, an ACH transfer is free. Most banks and financial institutions offers free transfers between accounts. Some ACH transfers to external banks can have fees, but those fees are often less than $5 per transaction. You may also have the option to pay a fee for an expedited transfer for time-sensitive payments. 

You may also encounter fees if you have insufficient funds or go over a transaction limit. For example, most savings accounts have a limit of six withdrawals per month, so your ACH transfers could include a fee or be rejected due to these federal limits.

Why choose an ACH transfer?

Nearly all modern consumers and businesses are already using ACH transfer. There are other options for transfer of funds (such as wire transfers) for different purposes, but it’s important to understand how ACH transfers work and the benefits they provide, even if you’re using ACH transfers already.

Pros & cons of ACH transfers

Pros Cons
Convenience: accessible by phone & computers International: often ACH transfers are not available across borders
Speed: faster than mail Limits: ACH transfers can be limited for savings accounts and excessive transactions, as well as transaction size limits
Price: few or no fees, no postage or paying for checks Timing: banks choose when transfers are processed, and usually only on business days
Recurring: for bills, savings, etc.  Scams: ACH transfer scams can be common, so don’t ever share your private information with unknown parties
Ease: often all you need is a single piece of information, such as a name or email
Vendor negotiation: small businesses prefer ACH transfers for more control
Options: ACH transfers can be processed through your bank or third parties like Zelle, Venmo, Paypal, and others. 

How do I use ACH transfers for business?

Our customers enjoy the ease, speed, and seamless benefits of ACH transfers through our Divvy Bill Pay platform. Team members simply add vendors and invoices, then admins approve the bill payments and schedule.  When it’s time for vendor payments to be sent out, bills are auto-drafted through ACH transfer— seamless AP fulfillment and up-to-date budgets for real-time spending.

Divvy leverages fast and safe ACH transfers to help businesses see exactly what they’re spending—in real-time.  Plus, Divvy gives you more control over budgets, without adding another disconnected financial system to your suite. Add Flex Plans for Bill Pay to access 1 to 3 months of float, improving your cash flow.  

However you bank, Automatic Clearing House transfers are likely a part of your everyday fund management. ACH Transfers are important for individuals and businesses alike, so we hope this information leaves you more aware and enabled to make smart decisions about your finances.

Learn more about Divvy by requesting a free demo of our platform.

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