The payee sends a request via the ACH network to ‘pull’ funds from the payer’s account. ACH DebitĪn ACH debit is initiated by the payee. A business pushes funds from its account into an employee’s account. A common example of this is direct deposit. Funds are ‘pushed’ electronically from the payer’s account to the recipient’s account. ACH CreditĪn ACH credit is initiated by the payer. The difference is who initiates the transfer. Each involves moving funds directly from one bank account to another. There are two types of ACH transactions: credits and debits. What differs, is that an ACH transfer is funds pulled directly from a checking or savings account. On the surface, ACH payments are just like any other electronic or credit card payment. Depending on the context in which they are used, switching to ACH can save a business a lot on labor and processing costs.

However, many people are still unaware of the relative benefits and pitfalls associated with ACH transactions.

In 2019 alone, the ACH network processed 24.7 billion electronic payments according to NACHA (the National Automated Clearing House Association). Since then, the ACH network has grown into a huge, centralized electronic payment system that handles billions of transactions every year. It was ultimately decided the best way to handle it was to create an electronic payment processing system called the ACH (Automated Clearing House). To combat the issue of paper checks, banks began looking for possible solutions. The first ACH association was formed in 1972 and was run by the Federal Reserve Bank of San Francisco. In the late 1960s, the banking industry was growing concerned that the volume of paper checks was going to surpass their ability to process and clear them. The term “ACH” has been around for nearly fifty years.

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