You may have heard about ACH payments, seen advertisements for processing companies that offer this service, and read articles on the need to use it. But what is ACH processing? How does ACH processing work? This blog will discuss the functions of the Automated Clearing House and ACH processors, describe different types of ACH payments, and explain where to go to get these tools for your business.
The Automated Clearing House
An automated clearing house (ACH) is a computer-based electronic network for processing transactions between participating financial institutions. It supports both credit transfers and direct debits.. It was created in the 1970s to reduce costs for banks and has developed extensively since. The automated clearing house (ACH) transfer mechanism allows individuals and businesses to send money electronically through a secure server without any human intervention. ACH processors utilize this government-sponsored system that connects all banks in America to support all types of payments and electronic transfers. The ACH funds transfer system supports:
- Consumer bills
- Direct Deposit
- Tax Payments
- Tax Refunds
- Recurring Payments
The Automated Clearing House has transformed how businesses and the government structure payments, making transactions safer and more efficient than ever imagined.
How Does ACH Processing Work?
The ACH Network is an electronic payment system that allows people, organizations, and governments to send money directly from one account holder’s bank without a third party. After card information is inputted, The ODFI (Originating Depository Financial Institutions) processes these transactions for its customers in bulk with other ACH payments regularly throughout the workday. Originators consequently get faster access than traditional means (such as overnight mail). Once the ACH operator receives transactions, the batches are sorted and transferred to the intended recipient’s financial institution: completing the payment seamlessly.
ACH processors simplify and speed up transactions by eliminating the need to deposit checks or currency into an account, which can take days depending on where you’re located in relation to your financial institution.
What are the Different Types of ACH Payments?
The two most common types of ACH transfers are called Credit and Debit. These ACH types enable ACH processors to push or pull money from one account to another depending on your needs at the time!
- ACH Credit is an excellent option for those who want to control when and where their money goes entirely. It becomes the customer’s responsibility to initiate the ‘push’ or flow of capital.
- ACH Debit is the preferred option for those who want businesses to pull funds directly out of a customer’s account.
These two types of ACH transactions function under one of the two ACH categories: direct deposit and direct payment.
- The government and businesses use direct deposit to make payments directly into a consumer’s account, especially for payroll. You can also get benefits like tax refunds or interest coupons delivered through this ACH payment type.
- Direct payments are a form of electronic money that allows you to send and receive payments from friends, family members, or organizations. You can purchase products with direct payments by using your bank account via the ACH network!
Understanding how ACH processing will work for your business will require your knowledge of your own business’s needs and these differences.
Where to go for your ACH Processor?
With Seamless Chex, you can breathe a sigh of relief. The company’s experience in processing ACH transactions for all industries makes them an expert on all your payment needs. We have bank relationships in all sectors, so we know how to help regardless of what type or size the company may need! With Seamless Chex, you can get all the features you need including:
- Same-day ACH Payment Processing
- Mobile Payments
- Simple API
- Mass Payouts
- Recurring Billing
- Shopping-cart Plugins
Contact a Seamless Chex expert to get your ACH payments and processing needs covered today!