Who Uses ACH

• ACH is used by the private sector, companies and even institutions like The Federal Reserve to quickly and safely transfer monies. There are literally trillions of dollars in financial transactions completed annually using the automated clearing house. The majority, approximately 60 percent, are conducted by Federal Reserve banks across the country. If there is an exchange of funds that does not include a paper check or other, tangible form of payment, ACH is most likely the process being used. Direct deposit of checks or tax returns, each time a debit card is used or monies are transferred between account types, ACH is the way this is done.
  
  

How it Works

• The ACH process works like this: a person or company first authorizes a transaction (a purchase at a store, for example) to occur. The institution then collects certain information, such as check account and routing numbers, or debit card data. They then forward this information to an Originating Depository Financial Institution (ODFI), where the data gets deposited into the ACH network. Then, an ACH operator distributes that information via electronic ACH files to the appropriate Receiving Depository Financial Institution (RDFI); which is usually the bank of the person or company that initiated the transaction to begin with. The RDFI then processes the transaction, and updates the account information.
  
  

The Benefits

• There are several reasons ACH transactions are used by nearly every financial institution in North America. As an automated procedure, ACH's require little-to-no manual processing; reducing the chance for errors and minimizing time and expense. Using ACH to settle transactions eliminates Non-Sufficient Fund (NSF) charges as well, because there are no 2-to-3 day "lag times" to settle transactions. Also, because of the automated nature of ACH's, they are also less expensive than traditional wire transfers, for the initiator of the transaction as well as the bank.