ACH

The Automated Clearing House (ACH) Network is an electronic payments network used by individuals, businesses, financial institutions and government organizations. The ACH began, in 1972, as a system operated by the Federal Reserve Banks at the request of members of local ACH associations. ACH electronic payments provide better cash management capabilities and lower costs than traditional paper payments. The ACH Network now supports electronic payments throughout all 50 states, the US territories and Canada. Efforts are currently underway for the development of a worldwide ACH Network, the Worldwide Automated Transaction Clearing House (WATCH).

An electronic check or ACH direct bank transfer is a bank transfer from your US checking account to another US checking account. You will have to void a valid check from your checkbook and copy the Routing number, the checking account number and the Check number to an electronic check. ACH electronic payments are restricted to US checking account holders. ACH should not be mistaken with Bank Wire, which works a little different and usually involves bank fees to be paid from both parties, while the use of ACH usually is free of charge.

What is ACH?

The ACH Network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system governed by the NACHA OPERATING RULES which provide for the interbank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities through which financial institutions transmit or receive ACH entries.

ACH payments include:

Direct Deposit of payroll, Social Security and other government benefits, and tax refunds;

Direct Payment of consumer bills such as mortgages, loans, utility bills and insurance premiums;

Business-to-business payments;

E-checks;

E-commerce payments;

Federal, state and local tax payments.

The number of ACH payments originated by financial institutions increased to 8.05 billion in 2002, up 13.6 percent from 2001. These payments were valued at $21.7 trillion. Including payments originated by the Federal government, there were a total of 8.94 billion ACH payments in 2002 worth more than $24.4 trillion.