ACH Payment Processing- ime

What Is the ACH Payment Processing Time in US Banking Sector

If you’re someone who has signed up for a service with a recurring payment or used direct deposit for your paycheck, then you have already taken advantage of the ACH payment system. But what is an ACH transaction? How long is the ACH processing time? And what are the benefits of using one? 

To help you better understand, let’s look at how long an ACH transfer takes in the US banking sector. 

What Is an ACH Transfer?

What is an ACH

Essentially, an ACH transfer is a process of transferring money from one bank to another without the need to write a check and bring it to a physical bank location.[2] Broadly speaking, the process is put in place to make money transfers more convenient for everyone. As such, ACH transfers include:

  • External fund transfers
  • Bill payments
  • Direct deposits from employers and government benefit programs
  • Person-to-person payments 
  • Business-to-business payments 
  • Sending money to friends and family 

Furthermore, there are two types of ACH transfers that vary in delivery speed and cost. Banks also process these transfers in two days. First, there are ACH debit transactions that involve “pulling” money from an account. One good example of this is when you set up a recurring bill payment for a service, as the company can then pull the money from your account whenever it’s due. 

The other type is ACH credit transactions, which let you “push” money online to different accounts. For example, when you transfer money online to another bank account or a friend’s account, that is an ACH credit transaction.

As for fees, ACH debit transfers, such as bill payments and direct payroll deposits, are typically free of charge. However, there may be fees should you need an expedited bill payment. As for ACH credit transfers, anyone sending money between accounts must pay a flat fee that will depend on the bank they’re using. However, there’s usually no fee to receive these funds. If a person makes a person-to-person payment through a third-party app like PayPal, it usually costs a small fee, depending on the payment method. 

How Long Does an ACH Transfer Take?

How long does an ACH transfer take? Usually, businesses can save time by using ACH payments. These eliminate the need to deal with paper checks that are typically fraud-prone, hunt down payments sent by mail, or manually handle any recurring billing. With an ACH payment, you ask your customer or vendor to authorize the transaction quickly. Additionally, because each transaction can now send up to $1 million, ACH transfers are better for significant B2B payments.

Furthermore, because ACH transactions are placed into “batches” (three times every business day), banks can reduce the operational costs and provide your business with lower transaction fees for more savings.

The catch, however, is that when it comes to ACH payment processing time in the US banking sector, regular transactions usually vary between three and five banking days. Furthermore, ACH transfer time also depends on a number of factors. Such factors include:

  • Cutoff times, which differ from bank to bank
  • The amount of money being transferred
  • Payment details, as any errors can result in a longer procedure
  • The receiving bank may decide to hold the funds for a day or more

To help you better understand ACH transfer times, here’s an example of what happens when you request one:

  1. You (or your company) send an ACH file to the bank. The bank receives this request and proceeds to forward it to the ACH platform. This is Day 0 of an ACH processing time. 
  2. The bank of your client receives the ACH request and debits their bank account. Afterward, the originator’s bank will credit the money. This is Day 1 of an ACH processing time. 
  3. If the bank encounters any issues, the client’s bank will notify the ACH platform during Day 2.
  4. If the bank finds zero issues, the ACH platform notifies the originator’s bank. From there, the originator’s bank confirms the payment with the originator, and the process is complete. This is Day 3.

How Long Does ACH Transfer Take? Same-Day ACH Transfers

Exactly how long does ACH transfer take? To meet the demand of the ever-changing business environment, same-day ACH transfers are now available thanks to NACHA.[3] Instead of waiting for the usual three to five business days to receive a payment, payers and payees can make an ACH payment and settle it within the same day, which adds even more convenience to the process.

However, there are limits to a same-day ACH transfer. For example, international transactions do not apply, and it’s worth noting that not all U.S. banks provide these same-day payments. There are also additional fees (an extra 5.2 cents), and a limit of $1 million applies per payment.[1]

At the moment, clients can submit their ACH requests through three processing windows per one banking day. The three processing windows are: 

  • 10:30 a.m. ET (settle by 1 p.m. ET)
  • 2:45 p.m. ET (settle by 5 p.m. ET)
  • 4:45 p.m. ET (settle by 6 p.m. ET) 

Can You Speed Up ACH Transfer Time?

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You can speed up the ACH payment processing time by sending the file at the earliest payment day. For example, you can settle your transaction by 1 p.m. ET if you submit your ACH request to your bank at 10:30 a.m. on the dot, as this is usually the first processing window when it comes to same-day ACH payments. 

It’s also worth noting that as long as the transfer amount is below $1 million, an ACH payment is eligible for same-day transfers. Anything above this amount will fall under the standard three to five business days process to complete. 

Benefits of Using ACH Transactions

Usually, ACH transactions are much less costly than other payment methods, with the catch being that ACH processing time isn’t instant. However, the tradeoff is also an excellent option for people who wish for the convenience of shopping online without using a credit card. Lastly, offering ACH for customers is often a perfect way to build convenience and attract a more significant customer base. 

Do you want to learn more about ACH and the process behind its processing and transfer time? Then make sure to check out our resources. Providing reliable service since 2008, we specialize in check printing and mailing to make sure all your checks are sent on time, every time. If this sounds like a service you need, remember that we are one call away from assisting you.