The ACH payments network links together thousands of banks and is used to electronically
transfer funds back and forth between checking and savings accounts of governments, organizations, corporations and consumers. The ACH payments network has been in operation for almost 40 years. It is one of the most stable and secure electronic funds transfer system in the world.
Types of ACH Payments
There are two types of ACH payments, ACH debits and ACH credits. ACH credits mean that funds are credited to a checking or savings account of either an organization, government entity, corporation, or individual account. An ACH credit is commonly known as a direct deposit.
A familiar use of an ACH credit is direct deposit of payroll into employee accounts. Companies use an ACH credit to electronically pay vendors, suppliers, or to refund customer accounts. Government agencies use an ACH credit to deposit funds from entitlement or social service programs. Property management companies use an ACH credit to pay service providers or disburse funds to property owners. An ACH credit has endless applications and can be used whenever money needs to electronically transferred into a checking or savings accounts.
The opposite of an ACH credit in the ACH payments network is called an ACH debit. An ACH debit electronically takes money from a consumer or business account and transfers the funds to another account. A common use of ACH payments for debits is online payments on websites whereby funds are electronically transferred from the buyer's bank account to the seller's account.
ACH payments are flexible. For example, ACH payments using direct debit let merchants accept checks-by-phone. ACH payments for online bill pay is at an all-time high and is continuing to grow each year. Recurring billing transactions are also an excellent application for ACH payments via direct debit of accounts.