What is an ACH Transfer and How Does It Work?

ACH transfers are an easy way to move money between financial institutions. Here’s how they work.

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Updated May 13, 2024
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If you’ve ever sent or received money online, chances are that you’ve used an automated clearing house (ACH) transfer. This is a popular way for both businesses and individuals to move money between financial institutions.

But how exactly does an ACH transfer work and is it always the best option? Let’s look at how this process can take some of the hassle out of transferring money as well as some alternatives you can use.

In this article

What is an ACH transfer?

An ACH transfer is an electronic funds transfer made between banks and credit unions across the automated clearing house network (ACH). The ACH network provides fast and secure transactions, with more than 29 billion ACH payments totaling $72.6 trillion processed in 2021. If you’re wondering how to transfer money for a particular purpose, an ACH transfer could be the right solution.

You’re likely already using the ACH network for online bill payments without even knowing it. This includes receiving direct payments rather than paper checks from your employer or getting Social Security benefits deposited directly into your account.

Millions of people use the ACH network for everyday transactions because of how easy and secure it is. If you want to set up direct deposit with your employer, you typically won’t have to do more than give your account and routing numbers to your payroll department or set it up yourself through a payroll portal.

For transfers between different banks, you typically link a bank account to another account using the same account and routing information. Depending on your financial institution, this process could take a few days and might require verifying small trial deposits to make sure the correct accounts are linked.

Types of ACH transfers

There are two types of ACH transfers: ACH debits and ACH credits. Here’s how they work:

  • ACH debit transaction: This type of transfer debits (pulls) funds from a bank account. With many electronic payments using autopay, you give a merchant permission to pull money from your account on a specific date each month.
  • ACH credit transaction: This type of transfer credits (pushes) funds to another bank account. Direct deposits from your employer are typically pushed from your employer’s account to your bank account.

How long does an ACH transfer take?

A standard ACH transfer typically takes two to three business days or days when banks are open. This usually won’t include weekends or holidays. Processing times may differ between each type of ACH transfer.

ACH credits are typically processed anywhere between the same day and two days. ACH debits can only be processed the same or the next day. If an ACH transfer is expedited, it could take only a few hours for the transfer to be completed.

Here are some factors that can affect the length of an ACH transfer:

  • Standard vs. expedited: Standard ACH transfers typically take a few business days to process, but an expedited transfer could be completed in just a few hours.
  • Time of day: Payments from ACH transfers are only settled, or deposited into accounts, at certain times during each business day. After a transfer is processed, it won’t deposit until the next settlement period.
  • Day of the week: ACH transfers aren’t settled on the weekends or federal holidays, so you’ll want to initiate a transfer near the beginning of the week if you want the money deposited that same week.
  • Errors: Certain errors can interrupt and delay the ACH transfer process, like insufficient funds or incorrect banking information. However, you typically have to go through a verification process first to ensure a valid bank account is being used for an ACH transfer.
  • Financial institutions: The National Automated Clearing House Association (NACHA) oversees the ACH network. NACHA has different timelines for financial institutions that could affect the speed of an ACH transfer. Additionally, each bank and credit union may have its own rules in place that could affect how long a transfer takes.

ACH vs. wire transfers

A wire transfer is another method of electronically transferring money between banks. Here are the main differences between ACH transfers and wire transfers:

  • Speed: Wire transfers are typically faster than ACH transfers and often offer same-day delivery. An international wire transfer could take more time than a domestic wire transfer due to longer processing times.
  • Cost: The speed of a wire transfer often comes with a higher cost compared to ACH transfers. Most ACH transfers have small or no fees unless you choose expedited service, whereas a wire transfer could cost $20 to $30 or more.

You would typically choose a wire transfer over an ACH transfer if time is of the essence, such as sending a large sum of money for a real estate transaction. If you don’t need to move money as quickly and you want to avoid fees, an ACH transfer could make more sense.

Learn more in our guide on how to wire money online.

ACH transfer limits

ACH transfers are typically safe and convenient, but there are a few limitations to keep in mind:

  • Amount limits: You might have per transaction, per day, and per month limits for how much money you’re able to transfer through the ACH network.
  • Fees: You typically have to pay a fee if you want faster processing times. Your bank might also charge an overdraft fee for insufficient funds if you start an ACH transfer and don’t have enough money to cover it.
  • International transfers: The ACH network allows international transfers, but the availability of this option might depend on your bank.
  • Cutoff times: You have to be aware of certain cutoff times for completing ACH transfers. If you miss the cutoff time, your transfer could be delayed until the next business day. If it’s a Friday, you might have to wait until after the weekend for the transfer to process.
  • Number of transfers: Some banks charge a fee if you make more than six ACH transfers from a savings account in a monthly statement period. Checking accounts don’t typically have this limitation.

FAQs

What is needed for an ACH transfer?

You typically need a valid bank account number and your bank’s routing number. Many financial institutions offer ways to link other bank accounts if you log in to your online account through an app or web browser.

What does an ACH transfer cost?

It depends on the type of ACH transfer and the financial institutions involved. Most ACH transfers between different accounts with the same bank are free, but you might see a fee if you transfer between different banks or want expedited processing. Most fees are typically less than 2% of the total transfer or a fixed amount of a few dollars.

Do all banks do ACH transfers?

All U.S. banks can do ACH transfers. It’s often easy to set up ACH transfers because you typically only need a valid bank account number and your bank’s routing number. Other financial services — including Venmo, PayPal, and Zelle — can also do ACH transfers.

Other ways to transfer money

Zelle

Zelle is a payment app that allows you to send and receive money between friends and family with quick results. It’s available in many different bank apps, including Chase, Discover, and Bank of America. Although Zelle is free to use, your bank might charge an additional service fee.

To get started with Zelle, sign up with your email or mobile phone number through your bank app or the Zelle app. You can then send money to almost anyone you know with a U.S. bank account by using their email address or U.S. mobile phone number. Transactions typically take a few minutes to complete. Read our Zelle review to learn more.

PayPal

PayPal is a payment app used by millions of people worldwide to send and receive money. It’s free to use and offers simple ways to connect different payment methods, including bank accounts, credit cards, and debit cards.

To use PayPal for sending and receiving money, you need a PayPal account. This is true for both parties involved in a transaction. To initiate a money transfer, log in to your PayPal account and select the “Send & Request” option. Once you enter the recipient’s name, PayPal username, email address, or mobile phone number, you can make the money transfer.

You can avoid fees when sending money with PayPal by using a PayPal Cash Card, your PayPal balance, or a linked bank account. There’s a 2.9% fee for each money transfer made using a debit or credit card.

It’s typically fast to send money to friends and family using PayPal, though it could take a few business days to transfer the money to your bank account. Instant bank transfers often come with a fee.

Cash App

Cash App is a free financial platform you can use on compatible mobile devices to send and receive money. It can also be used to buy and sell stocks and Bitcoin.

To send and receive money with Cash App, type in how much money you want to request or pay, and then use the phone number or email address of the other person to complete the transaction. You can also use the user’s $Cashtag, which is a unique username you pick when you create a Cash App account, to make a transfer.

Transfers between friends on Cash App are fairly quick, but a transfer of your Cash App balance to your bank account could take a few business days unless you pay for an instant transfer.1 Check out our Cash App review for more details.

Venmo

Venmo is a free payment app that’s similar to Cash App when it comes to sending and receiving money between friends and family. You can use your Venmo balance, a U.S. bank account, or a credit or debit card to transfer money with Venmo.

Venmo transfers between friends and family are typically fast and don’t come with fees unless you use a credit card to send money. Transfers to a linked bank account from your Venmo balance could take a few business days unless you pay a fee for an instant transfer.

Read our Cash App vs. Venmo comparison for more details.

If you plan to use credit cards to send money, check out our list of the best credit cards for Venmo.

Bottom line

ACH transfers are often a quick and easy way to transfer money between bank accounts, whether you’re moving money between your own accounts or sending money to a friend or family member. In some cases, it could make sense to use other financial services, such as payment apps, if you want to transfer money faster.

Keep in mind that while most ACH transfers are free, your financial institution may charge additional fees. Check out our list of the best banks to find one that doesn’t charge for ACH transfers and offers the banking services you need.

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Author Details

Ben Walker, CEPF, CFEI®

Ben Walker, CEPF, CFEI®, is credit cards specialist. For over a decade, he's leveraged credit card points and miles to travel the world. His expertise extends to other areas of personal finance — including loans, insurance, investing, and real estate — and you can find his insights on The Washington Post, Debt.com, Yahoo! Finance, and Fox Business.