What Is ACH?

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The Automated Clearing House (ACH) network is a highly reliable and efficient, batch-oriented electronic funds transfer system. NACHA-The Electronic Payments Association develops the rules and standards which provide for the interbank clearing of electronic payments for participating depository financial institutions. Both the Federal Reserve and Electronic Payments Network act as ACH operators, or central clearing facilities through which financial institutions transmit or receive ACH entries.

According to NACHA-The Electronic Payments Association, nearly 16 billion ACH payments were made in 2006, a 14.5 percent increase over 2005. The nation's financial institutions originated 15.4 percent more ACH payments in 2006 than in 2005. The number of these payments was 14.98 billion, a jump of more than 2 billion over 2005, and valued at $30.3 trillion. The remainder were originated by the federal government which exceeded 1 billion ACH payments in 2006, up 2.8 percent over 2005, and valued at $3.5 trillion. Annual ACH payment volume continues to double every five years, spurred by growth across all transaction categories and newer applications. NACHA estimates that 7.5 8.0 billion consumer bills were collected via the ACH Network in 2006, including pre-authorized debits, Internet and telephone payments, and checks converted into ACH payments.

ACH Debit Payments May Include:

  • Association/club dues
  • Corporate-to-corporate payments
  • Contributions to IRAs, SEPs, 401Ks, etc.
  • Government savings bonds purchases
  • Insurance payments
  • Mortgage and installment loan payments
  • Point-of-sale check conversion
  • Tax payments
  • Charitable donations
  • Telephone or online purchases

ACH Credit Payments May Include:

  • Payrolls and pensions
  • Employee expense reimbursements
  • Customer-initiated transactions (e.g., telephone bill payments)
  • Corporate-to-corporate payments
  • Dividends and interest payments
  • Social Security payments
  • Tax payments
  • Annuities