What is ACH?

• ACH is an automatic electronic system, connecting all of the nation's financial institutions in order to facilitate the transfer of funds.
  
  

Development

• Initially, ACH Debits were used in place of paper checks, but as the system grew in popularity and as Internet technology emerged, other applications of ACH included online bill payments and the development of online banking institutions, including PayPal, which is a form of online ACH, transferring funds between traditional banking institutions (banks and credit cards), processing funds as an intermediate.
  
  

Function

• Consumers use ACH Auto Debits to establish regular bill payments, initiate subscriptions and/or to make purchases on the Internet; businesses can collect regular payments for cars and other major purchases, including mortgages; and government agencies can employ ACH to collect tax debts, child support payments and levy a taxpayer's bank account when financial obligations fall into arrears.
  
  

Non-Sufficient funds

• Once the ACH transaction has been initiated, it is the responsibility of the origin account holder to assure that there are sufficient funds to cover the recurring transaction. ACH takes the funds from the origin account and verifies them before transferring them to the destination account. ACH will initiate the transaction, but if there are not enough funds to cover the transaction, ACH will not complete it, resulting in an NSF ACH entry.
  
  

NSF charges

• When the origin account does not have enough funds to cover the ACH transaction, both the banking institution and the owner of the destination account may levy NSF charges against the origin account. The transaction may be attempted more than once and in some cases, the banking institution may allow the transaction to occur, and charge a hefty overdraft fee. Alternatively, the bank may decline the transaction and charge an NSF fee equal to the overdraft fee.
  
  In Internet transactions using online banking institutions, including PayPal, the transaction may simply be declined. In those cases, PayPal will not charge an NSF fee, but the vendor more than likely will.