What is an ACH Credit Transaction?
An ACH credit transaction is initiated from the payer (customer) rather than the payee (you). Funds or donations are transferred out from the customer’s bank account at his or her request to your bank account. The ACH transfer is done electronically, bank-to-bank money transfers are processed through the Automated Clearing House (ACH) Network. A customer sets up a payment for a bill through his or her bank like any other non-ACH transaction. ACH credit transactions need to be pre-funded. That is you need to have a credit or money reserve balance in your merchant account. ACH credit transactions comprise more than 50 percent of all ACH transactions made in the United States and this number is ever increasing with more employers depositing directly to their employees or a vendor.
Exploring ACH Credit transactions to facilitate safe convenient electronic payments
ACH credit transaction is the digital transfer of funds from one financial institution to another. There were some common myths about what is an ACH credit transaction by business houses and people. These transactions are usually initiated by an employer for direct deposit to employees account or citizens receiving direct government benefits as a part of social security scheme or tax refunds or earnings you receive. ACH credits usually take 1-2 business days to process as the request for a transaction is not immediately sent. The most common type of ACH credit is direct deposit. You can set up ACH credits to make payments like setting up automatic mortgage payments and utility bill payments with your bank. Business owners can choose to pay state taxes through ACH credit. A key reason for the people and businesses choosing ACH transfers is their ease of operation, the convenience it offers, and the speedier environmentally-free transfer.
ACH Payment processing technique
ACH credit transactions allow you to ‘push’ money online to account at different banks, either accounts you own or friends and family member’s accounts. Financial institutions can choose to have ACH credits processed and delivered the same day or in one or two business days.ACH payment process involves several steps that include:
- Starts with the originator initiating the payment request and their bank processing with an ACH entry recording the relevant information about the details of transactions to follow.
2. The originating depository financial institution sends the ACH entry in a batch as per the specific bank’s schedule with other customers’ ACH payments for further processing through an ACH operator.
3. It is the operator’s job to process the ACH entries in that batch and determine whether the money’s being sent or received. The operator then sends the ACH entry to the other party’s bank.
4. The receiving depository financial institution gets the ACH entry and checks the validity of the transaction and whether there are enough funds in the originator’s account.
5. On checking the correctness of the transaction the receiving bank completes the ACH credit or debit as the case may be. In case of any fault detection, the ACH transfer will fail and a failure code is assigned to the ACH entry. The originator is informed and he is required to correct the error and again resubmit the ACH transfer request.