What Is an ACH Payment?

An ACH payment is an electronic payment created when a customer transfers money from one account to another electronically; it is facilitated by the Automated Clearing House network. The customer usually permits an originating institution to debit his checking or savings account directly for a single transaction or a recurring payment. Customers use ACH payments when paying their mortgages, utility bills and online transactions.

A significant advantage of ACH payments is that they make it easier for an individual to keep track of his financial transactions, as opposed to traditional checks. ACH payments use few resources and can be easily categorized when using financial software. Businesses that accept ACH payments benefit from their quick processing time, unlike checks, which the business has to receive and forward to the bank for clearing. It is less costly for a business to process an ACH payment than to process a credit card payment. Consumers benefit from the ease of using ACH payments to make recurrent payments automatically. Businesses that want to receive ACH payments from their clients partner with a payment processor who provides the service. ACH payments are extremely secure as they can only be initiated and authorized by the legal account holder.