Updated: November 9, 2024
Automated Clearing House (ACH) definition and meaning
ACH is short for the Automated Clearing House, which is a US-based network that enables financial institutions to transfer funds electronically. It is a low-cost, fast, and secure method for sending and receiving money through a digital transaction.
More about ACH transfers
By removing the delays and human errors involved with sending and processing paper checks, the ACH makes instant payments a reality for individuals, businesses, and financial institutions. While a check is delivered, deposited, and withdrawn sometime down the road, the ACH electronically processes fund transfers between banks or other financial institutions. Funds are drawn from one account and immediately deposited into another, speeding up the payment process and removing the administrative hassle from financial transactions.
Some examples of ACH transactions include fund transfers through popular apps like PayPal and Venmo. When a business pays employees through direct deposit or a household sets up recurring mortgage payments online, the ACH network helps make these types of electronic payments possible.
Who runs the ACH?
The ACH is run by the not-for-profit National Automated Clearing House Association, also known as NACHA.
Using ACH in a sentence
“The payroll company OnPay uses ACH to draw payroll funds from its small business clients, withhold payroll taxes, and then make payments directly to its clients’ employees.”
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