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In today’s increasingly cashless society, processing electronic payments is a necessity for business survival. As a result, most businesses offer credit card processing to maximize their sales. Credit card processing may be convenient for consumers, but it is more expensive for merchants and makes it far more likely that consumers will initiate a chargeback.
ACH payments offer a cheaper alternative to credit card processing with much more payment finality. Despite this, many businesses overlook ACH transfers due to a lack of understanding or concerns about payment delays.
To help businesses better understand their payment options, we’ll explain:
- What ACH Payments Are
- ACH Payment Processing Times
- How to Speed Up ACH Processing
What are ACH Payments?
Automated Clearing House (ACH) is an electronic funds transfer method that moves money from one bank account to another within the United States. ACH transactions are governed by the National Automated Clearing House Association(NACHA).
While card payments are processed by the credit card network, ACH transfers go through the Automated Clearing House system. It’s not just banks that use this system. Payment apps like PayPal and Venmo also use ACH to deposit money into your bank account. If you’ve ever paid a bill online or received a direct deposit, you’ve sent or received an ACH payment.
Types of ACH Payments
ACH payment processing times depend on the type of ACH transaction. There are two types of ACH payments: ACH debit and ACH credit.
ACH debit ⏤ also known as ACH pull transactions ⏤ refers to payments that are initiated by the receiver of the funds. Automatic billing is a good example of ACH debits.
ACH credit ⏤ also known as ACH push transactions ⏤ refers to payments initiated by the sender of the funds. Examples of these transactions include getting paid by your employer or receiving government benefits like Social Security.
ACH transactions are processed in batches that are like bulk digital mail. Each transfer request is packaged as a message within a large bundle of messages and then sent in bulk as outgoing mail by the originating bank to the ACH network. After receiving the batch, an ACH operator ⏤ either the Federal Reserve or the Clearing House ⏤ repackages the transfer requests by the recipient.
The new bundle is then sent to the bank receiving the payments. The ACH network sends batches at five regular intervals during each business day. As of March 2021, batches are sent at 6am, 12pm, 4pm, 5:30pm, and 10pm ET.
ACH Payment Processing Times
ACH processing time frames can range from a few hours to five days and depend on several factors. Unlike other electronic payment methods that are processed in real time, ACH transactions are accumulated and processed in bulk. This batch-processing method slows down the transfer of ACH payments between accounts.
The ACH Funding Cycle
The three-day process of ACH funding ensures that every step of the transfer is verified so that your business does not receive deposits from accounts with insufficient funds. Keep in mind that some banks may hold funds for a period of time, so ACH settlement can take longer than three days.
Here is the standard time frame for ACH payment processing:
Keep in mind that payment type, transaction errors, and the time a transfer is initiated can all affect total processing time. Having insufficient funds or transferring money on a Friday or bank holiday can delay processing by one to two days. While NACHA introduced same-day ACH funding in 2018, banks have 2 business days to report a failed payment, so many banks will hold funds during this period to ensure the payment clears without failure.'
How to Speed Up ACH Processing
Although typical ACH payment processing times average three days, there are ways to speed up the funding times. Much of this processing time is spent on authenticating transaction details and preventing payment fraud. Working with an ACH processor that can verify transactions before a transfer is initiated can significantly cut down ACH processing time frames.
Modern ACH processors like SeamlessChex employ advanced payment technologies to make bank-to-bank transfers more efficient. We provide real-time account authentication and bank balance verification to validate transactions before they enter the ACH network. Our upfront verification service coupled with same-day ACH services and/or RTP (real-time payments) helps reduce ACH payment processing time to one business day.
Sign Up for Fast ACH Payment Processing
SeamlessChex offers a secure and easy-to-use platform to send and receive ACH payments. We have a simple online application process and require no credit checks so businesses can set up their accounts quickly. With our payment pre-validation and optimized processes, Seamless Chex can shorten ACH payment processing time from the standard three days to just one business day. Sign up for a free trial to see our fast ACH payments in action.
For more information on ACH payment processing times, contact us to learn how our quick and cost-effective ACH transfers can help your business grow.
