What is an ACH check, and how does it process?

You might hear people refer to "ACH checks" when discussing electronic payments. While not an official industry term, "ACH check" is colloquial shorthand that typically refers to either eChecks or ACH payments in general—electronic transactions that replace traditional paper checks.

Understanding what people actually mean when they say "ACH check" helps you choose the right payment method and communicate clearly with vendors, banks, and payment processors.

What is an ACH check?

"ACH check" is informal terminology that people use to describe electronic payments processed through the Automated Clearing House (ACH) network—particularly when those payments replace traditional paper checks.

When someone says "ACH check," they usually mean one of two things:

1. An eCheck (electronic check): A specific type of ACH debit payment that electronically debits a checking account, mimicking how paper checks work
2. An ACH payment in general: Any electronic transfer through the ACH network that replaces a paper check

Understanding the correct terminology

Here's what these terms actually mean:

• ACH (Automated Clearing House): The U.S. electronic network that processes payments and transfers between financial institutions. It's the infrastructure, not a payment type.
• ACH payment: Any electronic transaction processed through the ACH network, including direct deposits, bill payments, and business transfers.
• ACH transfer: The act of moving funds from one bank account to another via the ACH network.
• eCheck (electronic check): A specific type of ACH debit payment that replaces paper checks by electronically debiting a checking account.
• Nacha: The nonprofit organization (formerly the National Automated Clearing House Association) that manages the ACH network and sets operational guidelines. According to Nacha, the ACH network processed 33.6 billion payments worth more than $86 trillion in 2024.

How ACH processing works

Whether you're processing an eCheck or a standard ACH payment, the basic workflow through the ACH network is the same:

Step 1: Initiation

First, the originator, or payer, initiates the ACH transfer request by providing essential banking details including the ACH routing number and account number. They could be an individual or a business, and they do this through their bank or payment processor.

Types of transactions include:

• Payroll (direct deposit)
• Customer or vendor payments
• Bill payments
• Recurring payments

Step 2: ACH processing

The originator's bank submits the transaction to an ACH operator—either the Federal Reserve or The Clearing House's Electronic Payments Network (EPN). The ACH operator sorts and routes transactions to the appropriate receiving banks while ensuring compliance with Nacha guidelines.

Step 3: Settlement

Lastly, the receiving bank processes the transaction and either credits or debits the appropriate account. Payments typically settle in 1–3 days.

ACH payments aren’t processed on weekends, federal holidays, or bank holidays, which could cause a delay. Likewise, insufficient funds will disrupt the transaction.

ACH payment processing times and fees

Standard processing

ACH transfers usually take 1–3 business days to process. They don’t process on weekends or federal holidays, so it could be longer depending on when you initiate payment.

Same-day ACH

Same-day ACH offers an accelerated option for particularly time-sensitive transactions, such as customer refunds or emergency payroll. But the availability of same-day ACH payments relies on:

• When you initiate the transaction: ACH payments process in batches throughout the day, so you must initiate the payment before the final cutoff
• The size of the payment: There's a $1 million limit on same-day ACH
• Your bank: Some banks don't support same-day ACH payments

Same-day ACH and instant ACH are not the same thing—same-day ACH settles within hours on the same business day through the ACH network, while instant ACH (real-time payments like RTP or FedNow) settles in seconds.

ACH fees

ACH payments are known for being less expensive, where it generally costs $0.20 to $1.50 per transaction. Wire transfers and ACH differ significantly in cost, with wire transfers typically costing between $10 and $35 per transaction.

Fees depend on:

• Your bank’s policies
• Cutoff times
• Transaction type
• Volume of transactions
• Whether the payment is standard or same-day

In contrast, paper checks cost between $1 and $4 per transaction, plus shipping and handling costs. Wire transfers typically cost between $10 and $35 per transaction.

ACH vs. eChecks: What's the difference?

People often use "ACH check" when they specifically mean an eCheck. eChecks are a type of ACH payment. While all eChecks use the ACH network, but not all ACH payments are eChecks.

The benefits of using ACH payments

ACH payments have become essential for modern businesses, delivering reliability, efficiency, and security that paper checks can't match.

Some of the top business benefits include:

• Lower transaction costs: ACH processing fees are usually $0.20 to $1.50 per transaction. For businesses processing hundreds or thousands of monthly payments, these savings compound quickly.
• Faster settlement: Standard ACH payments process in 1–3 business days. And if you’re down to the wire and meet the eligibility criteria, same-day payments are possible.
• Enhanced security: Using a digital process eliminates many of the ACH fraud risks associated with paper checks. According to the Association for Financial Professionals, 63% of organizations still experience check fraud. With digital authorization, encryption, and automated verification, the risk of tampering, forgery, and theft drops.
• Automation and convenience for recurring payments: ACH supports automated recurring payments for utility bills, subscriptions, payroll, or loans. This reduces your administrative burden and the risk of late or missed payments.
• Reliability for payroll and vendor payments: ACH offers predictable settlement times and lets you schedule payments precisely. This makes cash flow forecasting more accurate and removes the guesswork of waiting for checks to arrive and clear.

When do businesses use ACH?

For businesses, ACH payments streamline financial operations by automating routine transactions and reducing manual processes. Common use cases include:

• Payroll: Companies deposit employee wages into bank accounts via ACH, eliminating paper checks and ensuring timely, reliable payments. This reduces payroll costs and administrative time while providing employees with quick access to their earnings.
• Vendor payments: ACH lets you pay suppliers and service providers automatically on predefined schedules. This means on-time payments, stronger vendor relationships, potential early payment discounts, and detailed digital records for accounting.
• Recurring bill payments: Utilities, insurance companies, and subscription services use ACH for automatic monthly billing. This ensures automatic payments and scheduling, so you don’t need to worry about it.
• B2B transfers: Many companies prefer to pay vendors via ACH, reducing administrative costs and streamlining accounts payable. It’s secure for wholesale orders, lease payments, and other large transactions.

Why businesses choose ACH

For business transactions, there are a variety of options. But companies choose B2B ACH for these reasons:

• Cost-effectiveness
• Speed
• Security
• Reliability
• Automation of recurring payments
• Integrations with accounting and expense management software

Regulatory and compliance considerations

There are authorization, security, and recordkeeping guidelines for using ACH payments. Keep these regulatory and compliance considerations in mind:

• You must follow Nacha guidelines for timing, formatting standards, and ACH return codes
• All banking and payment information must be secured based on Nacha and FTC rules
• Originators need to maintain written or digital authorizations for ACH payments and comply with consumer protection rules
• Same-day ACH payments are subject to cutoff times and dollar limits

Streamline ACH payments with Ramp

ACH payments offer businesses a secure, cost-effective way to transfer funds while minimizing reliance on paper checks or manual processing. Ramp enhances this process by automating ACH transfers, providing real-time tracking, and reducing processing costs through efficient workflows.

With Ramp Bill Pay, finance teams gain complete visibility into every payment. Track status in real time, schedule transfers with precision, and automate reconciliation with audit-ready digital records. Built-in security protocols and streamlined approval flows protect sensitive financial data.

Ready to learn more? Try an interactive demo and see how Ramp can automate your accounts payable function.

This post includes general information about ACH payments. For help with ACH functionality specific to Ramp, visit Ramp Support for more details.