What is an ACH payment? How it works, costs, and timing

ACH payments move money behind the scenes every time you get paid by direct deposit, pay a bill online, or transfer funds between accounts. Even though they're everywhere, most people don't know how they actually work.

This guide explains what ACH is, how it works, and why it's a key part of modern finance. If you’re running a business, you’ll want to understand how it impacts your payments.

What is the Automated Clearing House (ACH) network?

ACH sends payments directly between bank accounts, so you don’t have to deal with paper checks or manual steps. It’s faster, more secure, and usually cheaper than traditional methods. The network runs on rules set by Nacha (National Automated Clearing House Association)—the group that oversees how ACH payments are processed across the U.S.

What are ACH payments?

An ACH payment is a type of electronic money transfer that moves funds between bank accounts using the ACH network. These payments, sometimes called direct payments, are commonly used for payroll deposits, bill payments, and bank-to-bank transfers.

Who uses ACH payments?

ACH payments are used behind the scenes any time you get paid, pay a bill, or move money between accounts. Here’s how different groups use it:

• Individuals use ACH for direct deposit, online bill pay, tax refunds, and sending money to friends or family.
• Businesses use it to pay employees, collect payments from customers, and pay vendors.
• Government agencies like the IRS and Social Security send refunds and benefits through ACH.
• Banks and credit unions process ACH payments for things like loan payments and account transfers.

ACH is fast, affordable, and built to handle volume, which is why it's one of the most used payment systems in the country.

How do ACH payments work for businesses?

ACH payments allow businesses to send and receive funds electronically, reducing reliance on paper checks and credit card fees. Here’s how an ACH payment actually moves from one account to another:

1. Transaction initiation: A business (payer) authorizes an ACH payment by providing its bank with details such as the payee’s account number and routing number.
2. Batch processing: ACH payments are processed in batches rather than individually, making them more cost-efficient than wire transfers.
3. Clearing and settlement: Banks and payment processors verify and process the transaction, ensuring funds move securely between accounts.
4. Funds deposited: The recipient (vendor, employee, or partner) receives the payment within 1–3 business days, or the same day if same-day ACH is used.

Since ACH payments are automated, they’re less error-prone and faster to reconcile than manual methods. Some businesses also use software that makes it even easier to track and approve ACH bills.

How can my business send ACH payments?

If you’re paying employees, vendors, or contractors by ACH, here’s how to get started:

1. Set up ACH access. Use your bank, payroll provider, or payment platform to enable ACH payments.
2. Get permission to pay. Make sure the recipient authorizes the transaction, either through a signed form or digital approval.
3. Send the payment. You can initiate transfers through your bank, AP software, or accounting tools.
4. Wait for processing. ACH payments usually clear in one to three business days, depending on timing and bank policies.

How can my business accept ACH payments?

ACH is a low-cost way to collect recurring payments, invoices, or subscriptions. Here’s how to set it up:

1. Open an ACH merchant account. Work with a bank or payment processor that supports ACH collections.
2. Get customer approval. Customers need to authorize the ACH debit, usually through an authorization form or online opt-in.
3. Schedule the payment. You can set up recurring billing for things like SaaS subscriptions, utilities, or memberships.
4. Receive the funds. Once cleared, the money lands directly in your business account—and often with lower fees than card payments.

You can also connect your ACH setup to billing or invoice management software to keep everything organized and reduce manual work.

Which ACH payment type should you use?

Before you send or receive money through ACH, it helps to understand the two types of transactions. Each one works differently depending on whether you're paying someone or collecting a payment.

Understanding ACH credits and debits

ACH payments come in two types—credits and debits—and knowing the difference helps you use them the right way.

• ACH direct deposits (credits): You use these when sending money out. Think payroll, tax refunds, or paying a vendor.
• ACH direct payments (debits): You use these to pull money in—like collecting customer payments for subscriptions or invoices.

If you’re paying employees or vendors, you’ll use direct deposits. If you’re collecting from customers, direct debits do the job.

Common ACH uses for businesses

ACH payments power everything from employee paychecks to vendor transactions. Here’s where businesses use them most:

• Payroll: Direct deposits make payday simple and fast.
• Customer billing: Set up recurring payments for subscriptions or invoices.
• Vendor payments: Pay suppliers electronically without writing checks.
• B2B transfers: Move money between business accounts without wire fees.
• Taxes: Send business tax payments to the IRS or your state agency.

For high-volume teams, ACH offers a faster and more affordable way to manage payments without the manual overhead.

How long do ACH payments take?

ACH payments aren’t instant. They’re processed in batches at set times during the day, so the money doesn’t move in real time. The exact timing depends on when the payment is submitted, your bank’s processing schedule, and whether you use standard or same-day ACH.

Typical ACH processing times

Most ACH payments land within one to three business days, but delays can happen if a transaction is submitted after a bank’s cutoff time or on a weekend or holiday when processing pauses. If you're running payroll or paying vendors, it's smart to build in extra time. To avoid late payments, schedule transactions a day or two in advance and double-check bank cutoffs.

What to know about same-day ACH

Same-day ACH lets eligible payments settle faster—usually within hours. It’s a good option for last-minute payroll runs or urgent vendor payments. But it often comes with higher fees and lower transaction limits. Most banks cap same-day ACH at $1 million per payment and require submission before a set cutoff time.

It’s a powerful tool for improving cash flow, but may not be the best fit for every transaction.

How much do ACH payments cost?

ACH is one of the most affordable ways to move money—especially if you’re sending a high volume of payments. The cost of ACH can vary depending on your bank or payment provider, but they’re usually much lower than credit card or wire fees.

Typical ACH fees

What affects your ACH costs

• Bank or processor: Banks often charge less than third-party platforms, which may add markups.
• Volume: Higher transaction volume can unlock lower rates.
• Same-day vs. standard: Faster payments usually come with higher fees.
• Returns: If a payment fails due to insufficient funds or a bad account number, you may get hit with a return fee.

Even with these fees, ACH is still cheaper than credit cards and much less expensive than wire transfers.

Are ACH payments safe?

ACH is a secure network, and it’s governed by strict rules from Nacha. Transactions are encrypted, monitored for fraud, and verified before they’re processed.

Still, like any digital payment method, ACH isn’t risk-free. To stay protected:

• Require customer authorization before pulling funds from an account.
• Use account verification tools to check for errors or fraud.
• Set up dual approval for high-value payments.
• Protect your business with strong passwords, multi-factor authentication, and real-time fraud alerts.

ACH is generally safer than checks, but only if you have the right safeguards in place.

What do ACH return codes mean?

When an ACH payment fails, your bank sends back a return code that explains what went wrong. These codes help you fix the issue so you can retry the payment quickly.

To avoid delays, keep an eye on return codes and set up automatic retries where possible. Catching these issues early helps protect your cash flow and avoid extra back-and-forth with customers.

ACH vs. other payment methods: What’s the difference?

The way your business moves money affects more than just speed. It impacts your costs, cash flow, and the time your team spends chasing down payments. Comparing options like ACH and wire transfers helps you choose the right tool for the job.

ACH vs. wire transfers

Both ACH and wire transfers move money electronically, but they serve different needs.

ACH is ideal for everyday payments like payroll, vendor bills, or recurring invoices. It’s more affordable and easier to automate. Wire transfers work better for urgent or high-value international payments. They settle faster but come with higher fees.

Is an ACH transfer the same as an EFT?

Not quite. ACH transfers (sometimes called ACH checks) are a type of Electronic Funds Transfer (EFT), but not the only kind. EFT also includes credit card payments, wire transfers, and peer-to-peer platforms.

For most U.S. businesses, ACH is the most cost-effective EFT option—especially for routine payments like payroll or vendor invoices. Wire transfers settle faster, but ACH saves money at scale.

Can you use ACH for international payments?

Standard ACH is for domestic payments only. Some banks offer International ACH Transactions (IATs), but these come with extra steps like currency conversions, higher fees, and compliance checks—which can slow things down.

Because of those added requirements, most businesses use wire transfers, SWIFT, or third-party platforms for cross-border payments. ACH is still the best fit for moving money within the U.S.

Do all banks support ACH transfers?

Nearly all major U.S. banks and credit unions support ACH. Processing times vary, but most payments settle in one to three business days. Some banks also offer same-day or instant ACH for an added fee.

To know what to expect, check with your bank about cut-off times, fees, and processing speeds. Not all ACH services are created equal.

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Is ACH a good fit for your business?

ACH works well for most U.S.-based businesses, whether you’re just getting started or processing thousands of payments a month. It’s secure, affordable, and built to scale with your needs. Use ACH to simplify payroll, automate recurring billing, and keep cash flowing smoothly without the manual work or card fees.

How different businesses benefit from ACH

• Small businesses: Compared to credit cards, ACH cuts payment processing costs and automates recurring invoices, so you can focus more on growth and less on paperwork.
• Mid-sized businesses: Handle bulk payments more efficiently and improve cash flow visibility.
• Enterprises: Manage high transaction volume at a lower cost while keeping payment operations secure and compliant.

When ACH may not be the best fit

ACH works well for most domestic payments, but some situations call for a different method:

• For real-time payments, consider RTP (Real-Time Payments) or wire transfers.
• For large international transfers, SWIFT payments offer broader global reach.

For U.S.-based payments, ACH remains the most affordable and widely used option.

Why businesses choose ACH

ACH gives companies a predictable, scalable way to move money. It cuts out paper checks, reduces fraud risk, and keeps payment operations running smoothly.

You can use it to:

• Automate payroll
• Collect recurring customer payments
• Manage vendor transactions
• Improve cash flow

All of that, for a fraction of what you’d pay in credit card or wire transfer fees.

Automate your accounts payable with ACH payments

Managing accounts payable processes for a small business can get complicated quickly. ACH debit transactions help you automate vendor payments, but most service providers don’t integrate them with broader AP workflows.

‍Ramp’s corporate cards with accounts payable software lets you:

• Save time: You can save 10 minutes per invoice by digitizing approval workflows and automating document matching. Ramp's AI engine takes care of everything, saving you time and money.
• Streamline vendor setup: Centralize vendor onboarding and verify bank account information to make sure your payments go through. Vendors can verify their information via a secure link.
• Pay with multiple channels: Pay however you want with Ramp—through ACH, virtual credit cards, checks, or wire transfers.
• Save money: Ramp doesn’t charge processing fees for domestic bill payments.

Try Ramp Bill Pay to simplify payments, improve cash flow, and keep your business running smoothly.

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