How long does an ACH payment take? There are several factors that can affect ACH payments processing time. The ACH payment processing time can also depend on the type of payment as well.
Here, you will learn about how long ACH payments take to process, the different types available, and important factors that will affect the entire procedure.
What Is an ACH Transfer?
_________
What does ACH payment stand for? ACH is an automated clearing house, and it is a system developed in the seventies for bank-to-bank transfers. It was developed by Nacha (National Automated Clearing House Association), and it connects over 10,000 institutions across the country.
The primary idea behind it is to simplify the entire process behind transactions and many banks use it for domestic transfers. Over the years, ACH became one of the most popular methods for transactions within the country, and many banks started offering this method for international payments as well.
Many companies and individuals use ACH transfers, and they are great for business-to-business, person-to-person, and many other types of payments. But one thing you should be aware of is that these transfers are not instantaneous.
How Do ACH Transfers Work?
Before you are able to understand the ACH transfer time, it is essential to understand how these transfers work. The idea behind the ACH payment process is quite simple. The system is based on the net settlement method, which means that banks will only pay the difference between total transactions during the time period.
For example, bank 1 could send $100 to bank 2, while bank 2 will send $150. Instead of sending the money back and forth between the banks, the first one will only send the difference, which is $50 in this example.
Naturally, the real system includes many more banks and it is a bit more complex. But the basic idea is the same. Another important fact is that the majority of banks have daily processing.
What this means is that the payment won’t be processed as soon as you send it. And if you missed the time window, you will need to wait for the next day, or at least, the next processing period. Even though some banks process payments multiple times per day, it will still take time to complete the transaction.
What this means is that the payment won’t be processed as soon as you send it. And if you missed the time window, you will need to wait for the next day, or at least, the next processing period. Even though some banks process payments multiple times per day, it will still take time to complete the transaction.
How Long Does It Take
So, how long do ACH payments take to complete? Generally speaking, it takes between 1 and 3 business days to complete a transaction using the ACH network. But these numbers will vary from bank to bank. It is also worth mentioning that some banks offer same-day transactions within the ACH network, which means that they can be completed a lot faster.
At the same time, fees for these transactions are often higher, which downplays one of the biggest advantages of ACH transfers. To understand better how these transfers work, you should know more about the timeline for each individual transaction.
- Day 0 – The moment you submit a payment the bank will process it and send it to the ACH network.
- Day 1 – During the first day after submitting the payment, the file will be available at the customer’s bank, and the bank will debit the account. After that, funds will be credited to ODFI (Originating Depository Financial Institution).
- Day 2 – The bank will have two days to notify the network if there are any failures or errors during the process.
- Day 3 – The bank will receive a notification from the ACH network, notify you about the payment, and finalize the transaction.
And this is one of the main reasons why it is important when you start the transaction. Of course, if the bank processes payments multiple times per day, it will not be as essential as with banks that do it on a daily basis.
What time are ACH payments processed? That is something that will depend on the specific bank.
Types of ACH Transactions
_________
Another important thing to mention is that there are different types of ACH payments, and that can sometimes affect the ACH payment processing time. The most important types are ACH credit transactions and ACH debit transactions.
With ACH credit transactions, the money is moved from the ODFI to the RDFI (Receiving Depository Financial Institution). The process must be finished within two business days, which is different from the previous example.
There are also ACH debit transactions where the funds are moved from RDFI to ODFI, and the entire transfer needs to be processed within one business day. Naturally, RDFI will hold the transaction for one or two business days, allowing banks to verify the necessary info and ensure that the account has sufficient funds to finalize the transaction.