What’s an ACH Payment? How To Use ACH Transfers for Faster Payments

online banking, ach payment

What’s an ACH payment? That’s a question every business owner or employee or freelancer needs to ask. ACH payments are bank transfers that direct deposit payments into your bank account. Here are some scenarios where you’ll run into ACH transfers:

  • If you are an employee and sign up for direct deposit of your paycheck, ACH transfers are how your paycheck are delivered.
  • As a business owner, you’ll need to know how to issue an invoice with ACH transfer, check, or credit card as a payment option for your clients.
  • If you’re a freelancer, ACH payments can get you paid more quickly by clients.

How ACH Payments Work

So here’s how ACH works. ACH means Automatic Clearing House. It’s a batch processing system that clears bank to bank transfers. The ACH system batch processes bank transfers three times a day, which is agreed upon by banks and financial institutions that participate in the system. You can use ACH payments for the following uses:

  • paying your bills online
  • signing up for direct deposit
  • making deposits into your IRA
  • pay vendors or receive payments from clients

The Benefits of Using ACH Payments

When you use ACH payments, you usually don’t have to pay processing fees. You might already have a lot of your automated bill pay set up by ACH bank account debit.

You also get your money delivered faster than waiting for a check to clear. Oh, and did we mention you don’t have to leave your home? The future of banking is from your couch.

The Limits of ACH Technology

ACH transfers often set limits on how often payments can be sent, how much is transferred per deposit (you may have seen this with your bank account transfer service) and sometimes won’t allow you to send deposits internationally to help prevent fraud. So, ACH might not be the best option for large jobs or large paychecks, or if you have frequent deposits or transfers.

Issuing an Invoice for ACH Payments

If you’re a business owner, you can make ACH payment available on your invoices as a payment option. Just use a service that uses ACH payments — like Stripe, Plaid, or Yottled — and set up a merchant account. Give your bank account details, and then you can use that service to allow your clients to pay you via ACH in the future. Keep in mind the difference of the following terms:

  • ACH credit is the payment type used in bill pay services. When you use ACH credit, you’re authorizing your financial institution to send payment to a payee.
  • ACH debit is what you’ll use on invoices, submitting your bank account details to the payee in a secure manner via an ACH account service so they have your banking information to submit payment directly to your account.

As an employee or freelancer, you can ask your client or employer to give you a form to fill out for direct deposit of your paycheck by ACH. Fill out the bank info and you don’t have to track and deposit paychecks anymore. Many payroll softwares now have this option for your convenience. When you get a new job or client, sign up to receive direct deposit by ACH for recurring payments. It’s truly set it and forget it.

As always, please make sure you only reveal bank account and personal identifying information to trusted partners, and never share passwords or private financial information with third parties.


Laura Cowan

Laura Cowan

Laura K. Cowan is a tech editor and journalist whose work has focused on promoting sustainability initiatives for automotive, green tech and conscious living media outlets. A deep study of narrative journalism, storytelling and sustainable technology allows Ms. Cowan to draw out the meaningful stories of best practices from diverse professionals in an exploration of the culture and trends in emerging industries. She is currently Co-Founder and Executive Editor of Midwest tech news blog, Cronicle Press. Ms. Cowan’s writing and speaking have appeared with Automobile Quarterly, Writer Unboxed, Inhabitat, CNBC, The Ann Arbor Observer and The National Society of Newspaper Columnists.

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