ACH Payment Meaning: A Comprehensive Guide

Mar 2, 2023 | ACH

Zil is a financial technology company, not a bank or an FDIC member. Zil offers banking services through partnership with FDIC member banks Silicon Valley Bank and Texas National Bank.

In today’s digital age, electronic payments have become increasingly common, and the Automated Clearing House (ACH) system has emerged as a popular payment method. Compared to card-based networks, ACH is less expensive and easier to maintain. If you are looking for the best way to make ACH payments, Zil provides the best checking account for all your business needs. Keep reading to know more about Zil and ACH payment meaning.

ACH Payment Meaning

An ACH payment is an electronic payment processed through the ACH network. The ACH network is a secure, electronic payment system connecting banks and other financial institutions in the United States. ACH payments are used for many things, like direct deposit of payroll, bill payments, e-commerce transactions, and other commercial purposes.

The Automated Clearing House (ACH) is a financial network in the United States that sends and receives money electronically.

The ACH network, which allows banks to send money quickly and securely from one account to another, is managed by the National Automated Clearing House Association, or NACHA.

Types of ACH Transaction

The ACH network is composed of two distinct types of transactions:

  • ACH credits
  • ACH debits

When money are sent from one account to another, typically an originating account, the phrase “ACH credit” refers to the transaction. Debit transfers, on the other hand, involve the beneficiary account taking money from the originator account.

How Does an ACH Payment Work?

Here is a detailed working principle of ACH payment:

  • Authorization: The first step in the ACH payment process is authorization. The person or business that initiates the payment must obtain approval from the account holder to debit or credit their account.
  • Payment Initiation: Once authorization is obtained, the payment can be initiated. This can be done through various methods, including online banking, telephone banking, or a third-party payment processor.
  • Transaction Routing: The ACH network is a central clearinghouse for all ACH transactions. When a payment is initiated, it is routed through the ACH network to the receiving bank.
  • Processing: The receiving bank processes the transaction, which includes verifying the account information and ensuring that the transaction meets all regulatory requirements.
  • Settlement: Once the transaction has been processed, the funds are transferred from the sending bank to the receiving bank. This is known as settlement.
  • Notification: The sending bank notifies the account holder that the transaction has been processed and the funds have been transferred.
  • Posting: The receiving bank posts the funds to the account holder’s account.

ACH payments are processed in batches, meaning multiple transactions are grouped and processed simultaneously. This helps to make the ACH payment process more efficient and cost-effective.

IS ACH and Same Day ACH same

ACH and same-day ACH are the same but differ in the speed of receiving the payment, and the charges will be higher for same-day-ACH when compared to normal ACH.

In 2010, NACHA tried getting banks to provide quick services. Since the concept had taken so long to spread, there was some pushback to this. The new services won’t be offered, according to some bank executives. NACHA launched Same-day ACH.

Following consideration of member feedback, NACHA has suggested new possibilities for Same-Day ACH reconciliation. As a result, the following is included in the proposal:

  • Electronic transactions, like debit and credit cards, are settled three times during the day: in the morning, mid-day, and at the end of the day.
  • If your home sale is international or costs more than $25,000, same-day settlement is not an available option.
  • All receiving institutions (banks, etc.) must update their systems. Based on the inverse relationship between the two numbers, the originating institution (ODFI) will be charged a predicted fee for these updates, which will decrease as the number of transactions grows.

What Is Required for an ACH Transfer?

If you have the necessary information, making an ACH money transfer is simple. To make an ACH money transfer, you must provide the following information:

  • Name.
  • Routing/ABA number.
  • Account number.
  • Bank account type (business or personal).
  • Transaction amount.

ACH transactions are typically processed within 1-2 business days, but Zil offers same-day ACH that allows the transaction to be completed on the same day it is initiated. This can be useful for businesses or individuals who need to receive or send money urgently.

Why are ACH Payments Important?

Advantages of ACH Transactions

  • Convenience.
  • Easier recurring billing.
  • Preferred funding compared to checks.
  • Fewer disputes.
  • More secure.
  • Environmentally friendly.


  • Slow process.
  • Limitation on the transfer amount.
  • Cutoff times.
  • Lack of International payments.

ACH Payment meaning, it’s an electronic payment that is processed through the ACH network. The secure ACH network links US banks and other financial institutions. ACH payments are an important and convenient method for making electronic payments. They offer many benefits over traditional paper-based payments, such as speed, security, and cost-effectiveness. For example, Zil, an online bank with top-tier ACH payment technologies, allows you to transfer funds to others easily and issue paper checks.

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