ACH credit vs. ACH debit: How they work and key differences

ACH payments are essential for everyday business transactions, from payroll to billing. These payments are accomplished through ACH credits and ACH debits. The two terms may sound complex, but the difference is simple: An ACH credit pushes funds to a bank account, while an ACH debit pulls funds from a bank account.

Understanding the key differences between ACH credits and debits—and exactly how each works—will help you make or accept these payments more confidently.

What is ACH?

ACH stands for Automated Clearing House, the primary electronic network for financial transactions in the U.S. This system processes more than 30 billion transactions annually, handling everything from payroll deposits and bill payments to business-to-business transfers. When you set up direct deposit or pay bills online, you're likely using ACH to move that money.

ACH transfers work by batching transactions together and processing them in groups rather than individually. Banks submit payment instructions to ACH operators, who then sort and deliver these instructions to receiving banks. The process typically takes 1–3 business days, making it slower than wire transfers but significantly less expensive.

The two main types of ACH transactions are ACH credits and ACH debits. ACH credits push funds from the sender's account to the recipient's account, while ACH debits pull funds from the payer's account to the recipient's account.

What is an ACH credit?

An ACH credit is a way to send money electronically from one account to another. The sender initiates a direct payment through their bank, which pushes funds from their account into the recipient’s account.

ACH credit payments are sometimes called ACH credit deposits and are commonly used for direct deposits. For the person sending the funds, ACH credits can be considered a digital version of a paper check.

ACH credit examples

ACH credits are often used for:

• Payroll: Employers use ACH credits to pay their employees via direct deposit
• Government benefits: The government often deposits benefit checks to citizens using ACH credits
• Vendor payments: Businesses use ACH credits to pay suppliers, contractors, and service providers electronically instead of issuing paper checks
• Bill pay: If you initiate a payment through your bank using an automatic bill payment system (like a mortgage payment), your bank is likely using ACH credit

ACH credits offer businesses and individuals a reliable, cost-effective way to send electronic payments while maintaining control over when funds leave their accounts.

What is an ACH debit?

An ACH debit is an electronic payment method that pulls funds from one bank account into another. In this case, the recipient requests payment from the payer. Once the payment is authorized, the recipient’s bank pulls those funds from the payer’s account. ACH debit payments are sometimes referred to as direct debits.

The bank initiates the ACH debit transaction, pulling funds from the payer's account and depositing them into the recipient's account within 1–3 business days.

ACH debit examples

ACH debits are most often used for:

• Auto-bill payments: Businesses that provide recurring services often use direct debits to make payments. For example, utility companies might use a bill pay service that pulls the amount shown on the bill from their customers' accounts on the day it’s due.
• Business-to-business (B2B) transactions: One-time B2B transactions, such as sending money between business partners, are often done using ACH debits. According to Nacha, B2B payments via ACH grew 10.8% year over year in 2023, showing their dominance as a B2B payment method.
• Government payments: The U.S. government often uses ACH debits to pull money from taxpayers’ accounts for quarterly estimated tax payments, payroll tax deposits, or similar purposes

ACH credit vs. ACH debit: Key differences

ACH credit transactions and ACH debit transactions are both methods for transferring money electronically; they just do so a bit differently. While ACH credits push funds to the recipient, ACH debits pull funds from the payer.

Here are a few other key differences between ACH credits and debits:

Both ACH methods provide secure, efficient electronic payment options. Your choice depends on who initiates the transaction and whether you're sending or collecting funds.

How ACH debit vs. credit work step by step

ACH credit and debit transactions must go through a specific ACH process from start to finish. Let’s look at how it all works for each case.

ACH credit process

1. Payer initiates payment: The payer (or originator) needs to make a payment. They provide their bank (the Originating Depository Financial Institution, or ODFI) with banking details such as the recipient’s account information, amount to be transferred, categorization code, and target settlement date.
2. Bank batches requests: The bank collects all ACH transaction requests and sends them in batches to the ACH system (or ACH operator) for approval
3. ACH network processes and routes: The ACH network sorts those payment requests. When the time comes to settle the payment, it tells the recipient’s bank (the Receiving Depository Financial Institution, or RDFI) to credit the recipient’s account on the settlement date.
4. Recipient receives funds: The recipient’s bank then places money into the recipient’s account

ACH debit process

1. Recipient initiates collection: The recipient (or originator) needs to collect a payment. They provide their bank (the ODFI) with an ACH authorization form that contains banking details such as the payer’s account information, amount to be transferred, categorization code, and target settlement date.
2. Bank batches requests: The bank collects all ACH transaction requests and sends them in batches to the ACH operator for approval
3. ACH network processes and routes: The ACH network sorts those payment requests. When the time comes to settle the payment, the payer’s bank (the RDFI) will debit the payer’s account on the settlement date.
4. Funds transfer completes: The recipient’s bank then pulls money from the payer’s account and places it into the recipient’s account

The ACH network is open for processing payments for 23.5 hours every business day and settles payment requests four times daily. Nacha, the organization that manages the ACH network, reports that 44% of these requests are for ACH credits, and 56% are for ACH debits.

Once your payment is in the ACH system, it's encrypted for security during transmission. In either case, the best way you can ensure your payment remains secure and arrives on time is to provide accurate banking information, such as the routing number and account number.

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Transaction fees for debit vs. credit

ACH debit and credit transactions are among the most economical payment methods available for bulk transactions. Yes, there are processing fees associated with using the ACH network, but processing paper checks and e-checks is more costly for businesses in the long run.

The most recent Association for Financial Professionals (AFP) Payments Cost Benchmarking Survey, conducted in 2022, found most businesses pay less than 50 cents per ACH transaction, with smaller companies paying between 26 and 50 cents and larger ones between 11 and 25 cents.

ACH credit fees

ACH credit fees typically range from $0.20 to $1.50 per transaction, depending on your bank and transaction volume. Some institutions charge monthly fees of $10–$30 plus per-transaction costs.

The sender generally pays these fees, though this can vary by agreement between parties. Here are a few money-saving tips:

• Negotiate better rates with higher transaction volumes
• Bundle ACH services with other banking products for discounts
• Compare pricing across different financial institutions
• Consider ACH processors that offer flat monthly rates for frequent users
• Use same-day ACH sparingly, as it carries premium pricing

ACH debit fees

ACH debit fees typically range from $0.20 to $1.00 per transaction, generally lower than credit transfers. Monthly service fees of $5–$25 may apply, plus potential returned payment charges of $2–$35.

The account holder initiating the debit usually pays these fees, though merchants sometimes absorb them for customer convenience. Here are a few cost-saving tips:

• Process debits in batches to reduce per-transaction costs
• Choose banks offering volume discounts for frequent users
• Avoid same-day processing unless necessary due to higher fees
• Set up automatic payments to minimize manual processing charges
• Compare providers, as credit unions often offer lower rates than large banks. Many institutions even waive fees with qualifying account balances.

In contrast, issuing paper checks costs $2.01–$4.00, while receiving them costs $1.01–$2.00 per check due to higher labor costs. ACH payments offer a significantly less expensive, more efficient alternative to paper checks, helping businesses save on transaction and labor expenses.

ACH credit vs. debit: Which is right for your business?

The ACH network benefits businesses of all types, including service providers, manufacturers, wholesalers, retailers, vendors, and suppliers. Other than the cost savings, businesses benefit from ACH transactions in the following ways:

• Convenience: ACH payments are more convenient for customers and suppliers/vendors. You send and receive payments electronically, saving you the hassle of dealing with paper checks.
• Error reduction: ACH transactions require less manual input from personnel, which helps minimize errors
• Faster payments: ACH transactions are quick and straightforward to initiate and can be completed on the same day if necessary
• More efficient payables management: Switching to ACH centralizes payment info, reduces lost invoices, and simplifies tracking via ACH trace numbers. Plus, automating ACH payments with tools such as Ramp Bill Pay streamlines your AP process even more.
• Storage space: ACH transactions are digital, which can help you save space on physical storage solutions and security for physical records such as paper checks
• Less mail: If your payments are all initiated through the ACH network, you can save money on postage costs
• Ability to automate: Paper checks allow partial automation but require manual steps. ACH payments, on the other hand, can be fully automated and integrated seamlessly with other software, minimizing human involvement.‍
• Increased security: The ABA Banking Journal has reported that while check use is down, check fraud is up. Although checks account for less than 9% of payments, they account for 66% of payment fraud. ACH payments help eliminate this risk.

Whether you choose to use ACH credits or ACH debits depends simply on whether you need to make or receive payments. Either way, the money is transferred securely and efficiently.

Automate your AP process with ACH payments

Efficiently managing ACH payments is critical to creating a smoother, more reliable AP process, helping you cut down on time and costs. Here’s how Ramp makes it possible:

• Save time: Reduce processing time by 10 minutes per invoice by automating approval workflows and document matching. Ramp’s AI handles the heavy lifting to save you time and money.
• Simplify vendor setup: Consolidate your vendor onboarding into one platform, with secure bank verification links to ensure smooth payments every time
• Choose your payment method: You can make payments via ACH, virtual cards, wire transfers, or checks
• Reduce costs: Enjoy zero processing fees on domestic bill payments, keeping more money in your business

Ramp’s AP automation software eliminates manual steps, reduces errors, and streamlines vendor payments—all while keeping costs low.

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