Connect with us


What Are They and How Do They Work?



If you’ve been looking into new ways to make electronic payments, you’ve likely encountered ACH payments.

There are several different methods for electronic money transfers, but not all methods are created equally in terms of security, fees and convenience.

For more information on ACH payments and how they work, keep reading for everything you need.

Related: There is a New “Conventional Wisdom” Needed in Personal Finance

What are ACH payments?

ACH is the acronym for Automated Clearing House. An ACH payment is a store-and-forward system that electronically moves funds. ACH is a type of authorization that permits the lender to retrieve money from your credit card account, bank or credit union through an electronic process.

For a payment to be authorized by the ACH, it must be a part of the Automated Clearing House Network. A financial institution member of the ACH holds credibility because it has been vetted thoroughly.

ACH is a cost-effective way to move funds because it eliminates the middleman process of writing paper checks or completing a wire transfer.

Millions of people use ACH payments every year, including:

  • Businesses
  • Individuals
  • Federal government
  • State government
  • Local government

If you’ve ever received a direct depositpaycheck, made an online bill payment, or signed up for autopay, you’ve participated in an ACH transaction. Although you might not have heard the name before, ACH payments are one of U.S. citizens’ most common payment methods.

Last year 29.1 billion payments adding up to $72.6 trillion, were reported by the National Automated Clearing House Association (NACHA). Those numbers are an 8.7%increase from 2020, and this year’s projections are higher than ever.

Related: 25 Payment Tools for Small Businesses, Freelancers and Startups

How ACH payments work: a step-by-step guide

The ACH process is a system of electronic fund transfers from one entity to another. There are several involved parties, even though most work behind the scenes to complete the seamless transfer.

1. Originator/client

This entity, such as a consumer or business, has agreed to participate in transactions through the payment system. Originators must consent to the transaction before it can occur.

2. Originating depository financial institution (ODFI)

Once an originator consents to the transaction, their financial institution will receive their payment instructions and send that information to the ACH Operator. This includes payment type, amount and payment schedule.

3. ACH operator

The ACH operator is a central clearing facility that receives payment information and instructions from the ODFI.

The Federal Reserve Bank and the Automated Clearing House are both ACH Operators. The ACH Operator performs the necessary settlement functions before the transaction can proceed.

4. Receiving depository financial institution (RDFI)

Once the ACH Operator has cleared the transaction, it is forwarded to the RDFI, the receiving financial institution. The RDFI’s job is to post the transaction into the receiver’s account.

5. Receiver

The receiver is the entity, such as a corporation or entity, which has authorized the originator to complete the ACH deposit into the receiver’s account.

Third-party service provider

While not always a part of the process, a Third Party Service Provider is an entity that carries out ACH Network duties for originators, ODFIs or RDFIs.

Third-Party Service providers perform functions like:

  • Creating ACH files for an originator or ODFI
  • Acting as sending or receiving point for an ODFI or RDFI

Third-party sender

As a subsection of a third-party service provider, this entity transmits ACH deposits for originators with no ODFI contractual agreement.

Types of ACH payments

ACH credits

ACH credits happen when the originator passes funds into the receiver’s account, the receiver’s account is then credited and the originator’s account is debited.

This type of entry is considered an offset or settlement. The most common type of ACH credit is a payroll direct deposit.

ACH debits

ACH debits occur when the funds are pulled from the receiver’s account with the RDFI, the receiver’s account is debited, and the originator’s account is credited.

This type of entry is also considered an offset or settlement. Common types of ACH debit are insurance premium payments and utility bills.

ACH entries

Depending on the receiver’s account type, an ACH entry is a consumer or non-consumer payment. It is up to the originator to determine the type of account, consumer or business, that they have secured for authorization.

Account validation

Before any entity can participate in ACH transactions, they must complete account authorization.

Standard account authorization methods are:

  • Prenotifications with routing number and account number (a non-monetary entry that comes to the checking account or savings account before the first actual entry)
  • Social security
  • Proof of ownership
  • Proof of address

Related: How to Maximize Your Social Security

Types of ACH transactions

When it comes to ACH transactions, there are both corporate, and consumer transaction types:

  • Corporate transactions happen between non-consumer entities, like businesses and corporations.
  • Consumer transitionsare between originators and individual consumers. Take a look below for more information on each.

Corporate credit or debit (CCD)

A CCD entry is either a single-entry, recurring ACH credit, or recurring ACH debit from a corporate account. It can hold one single addenda record.

CCDs have many different uses for originators, which include:

  • Paying vendors
  • Concentrating funds from outlying accounts (cash concentration)
  • Funding payroll
  • Funding petty cash
  • Funding other disbursement accounts

Related: How to Instantly Improve Your Small Business Payroll Management

Corporate trade exchange (CTX)

A CTX entry is a single-entry, recurring ACH credit or ACH debit. However, a CTX coming from a corporate account can support up to 9,999 addenda records. Corporate Trade Exchanges are generally used in partner trading correspondence.

Prearranged payment and deposit (PPD)

A PPD is a single-entry, recurring ACH credit or recurring ACH debit. These transactions happen between an originator and a consumer to make or collect an authorized payment.

Internet-initiated/mobile entries (WEB)

A WEB is a single-entry or recurring ACH debit. These transactions are digital, occurring when the consumer authorizes a transfer of funds with their online account or mobile device.

Telephone-initiated transactions (TEL)

A TEL is a single-entry or recurring ACH debit. These transactions are based on telephone authorization given by the consumer.

Pros and cons of ACH payments

Before you implement ACH payments into your business or opt-in for them in your personal life, make sure you have a complete picture of what they entail with their pros and cons.

Pros of ACH payments:

Benefits of ACH payments may include:

  • Convenience:ACH debit allows automatic recurring payments, which cuts paperwork and manual payments each pay period.
  • Accuracy: Using electronic automation reduces the margin for human error.
  • Cost: ACH processing fees are lower than credit card, debit card and wire transfer fees.
  • Security: The nature of ACH regulations and ACH payment confidentiality makes ACH transfers between accounts more secure than credit card payments and wire transfers.

Related: Credit Card Industry Terms Defined

Cons of ACH payments

Drawbacks of ACH payments may include:

  • U.S. exclusive: In this regard, wire transfers have the upper hand, as ACH payments cannot be made to or from international bank accounts.
  • Payment processing times: Because ACH payments occur in batches and go through a clearinghouse, ACH credit transactions can take up to three business days to process. However, debit transactions must be processed the next day, and other transactions are eligible for same-day processing.
  • Transaction limits: Different banks have different guidelines for transaction amounts, but many have limits — per transaction, daily, weekly or monthly.
  • Potential for payroll fraud: While automation saves time and reduces human error, it does mean that a physical person is not checking payroll amount each month. This allows room for employees to wrongfully inflate their hours or create fraudulent accounts while going unnoticed.

Related: I Know How To Easily Steal Money From Your Company’s Bank Account

Should you implement ACH payments?

Automated Clearing House payments are secure electronic payments authorized by the National Automated Clearing House Association. The ACH is a payment processor that can approve, vet, push, and pull transactions from business to business and business to individual.

Implementing an ACH system can be a prudent payment method option to cut the hassle and boost the use of automated bank transfers, as long as you are not looking for a same-day processing option.

Are you interested in additional research? Visit for information on financial planning, business tips and more.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


10 Things Every Working Woman Should Do This Year



Opinions expressed by Entrepreneur contributors are their own.

Self-care has become an all-encompassing term that has strayed from the importance of everyday commodities that keep us in good health and spirits. Though pampering and “treat yourself” moments still have value, here are ten ways to invest in yourself to produce long-lasting, positive results.

Related: 8 Self-Care Tips From Wildly Successful Entrepreneurs

1. Put money into a 401(k)

It’s never too early (or too late!) to start saving for the future. Depending on your employment status, there are different retirement savings accounts. 401(k)s are the most common since these are employer-sponsored and often come with an employer match. However, freelancers also have options, such as a SEP-IRA or a high-yield savings account, to put away extra, tax-free dollars for retirement.

2. Schedule a health checkup

Self-care first includes taking care of your physical health. It’s easy to discredit regular checkups when you’re feeling healthy, but make this the year to get your blood work done. It creates a baseline for your health to identify areas needing improvement or extra attention.

Also, choose areas in your life where you can make small changes. Improving your health doesn’t always mean a drastic overhaul; it may be as simple as drinking more water or adding an extra 30 minutes of exercise to your day.

Related: 3 Key Tips for Optimizing Your Physical Health as an Entrepreneur

3. Review health insurance benefits

Many people with health insurance aren’t sure exactly what it does and doesn’t cover. If you’re unsure, talk with your HR representative or your health insurance provider to get an overview of deductibles, co-payments and other supplemental benefits you may not be aware of. Then, decide if the health care plan makes sense for your current lifestyle.

Are you paying for benefits you don’t use, or do you need additional benefits that aren’t covered? Selecting the right plan will help ensure you have what you need without paying the extra expense for anything you don’t.

4. Ignite your curiosity

Maintaining healthy cognitive functions through new pursuits gives a boost to the brain. Get curious and find what speaks to you. This can be anything from exploring local museums, embarking on different hiking trails, learning a new language or reading more books.

There’s no limit to what you can do, and these activities can ignite more creativity and motivation in your work. While it may be helpful to look to others for inspiration, make them enjoyable so you’ll want to make them a regular occurrence.

5. Prioritize mental health

Mental health has been at the forefront of people’s lives over the past few years, as many have experienced burnout. We often equate productivity with a value that drives us to go beyond our means and leads to anxiety, stress and depression. Take note of your everyday stressors and see how to reduce or eliminate them. Then, replace them with relaxing outlets that allow you to recharge.

There are various ways to prioritize mental health, from practicing positive self-talk to meditation to scheduling an electronics-free day. You may have to try different solutions before you find one that fits.

Related: 5 Ways to Protect Your Mental Health as an Entrepreneur

6. Implement good sleep habits

Consistent sleep is one of the essential factors of good health but one that is often overlooked. For many, it can be challenging to wind down from the workday. Therefore, you must “train” your body to prepare for sleep by getting into a nighttime routine.

Create a sanctuary for yourself to improve your sleep habits. Enjoy a soothing cup of herbal tea, perform a skincare routine, and snuggle in with a good book rather than scrolling through your phone. Additionally, ensure your bedroom is dark and cool for ideal sleep comfort and turn on soothing sounds if it helps lull you to sleep.

7. Try something new

What have you wanted to try but have always held back? Maybe it’s public speaking or contributing to a blog. Whatever “new” has been on your to-do, make a plan, schedule it on your calendar and go for it. It’s common to hold back from these activities due to fear of the unknown or failure, but trying new things helps create confidence and can be the catalyst you need to push you to the next level.

8. Learn to set boundaries

Boundary setting is crucial to relationships yet can be difficult to master. It doesn’t always involve simply saying no to people’s requests. Instead, it requires protecting your own values when people violate them. Setting boundaries may mean spending less time with certain people, removing yourself from toxic situations, or declining invites to events that don’t improve your life. Explore areas where boundaries will help you grow, and keep in mind growth itself is a work in progress.

Related: How to Set Boundaries to Build Thriving Relationships

9. Spend quality time alone

Learning how to enjoy time spent alone is a valuable gift. We are inundated by a false sense of connection through the internet, which often makes us feel lonelier than ever. Then, we overschedule our calendars to make up for human connections, only to feel drained afterward. Slow it down and plan a few solo dates a month to see how it feels to be truly present with yourself.

For those who aren’t used to spending quality time alone, it can feel awkward and uncomfortable initially, but these stem from your own perceptions. Take in a matinee, sit in a coffee shop and read, or enjoy a concert or event you’ve wanted to attend. Alone time has been linked to improved stress management and greater life satisfaction, so it’s worth trying to give yourself more time.

Related: Turns Out, Those Who Like Being Alone Can Be More Creative

10. Get active

Getting active can take on several directions. It can be physical, emotional or spiritual. The point is to engage with people and pursuits that feed your soul. Whether volunteering within your community, setting yourself an exercise goal, or learning more about personal development, there are endless ways to get active and invest in yourself this year.

window.addEventListener(‘load’, function() {

fbq(‘init’, ‘1098588566942656’);
fbq(‘set’,’agent’,’tmgoogletagmanager’, ‘1098588566942656’);
fbq(‘track’, “PageView”);

Source link

Continue Reading


Are You a Winner? How to Truly Define Winning in Your Business



Opinions expressed by Entrepreneur contributors are their own.

Businesses gauge their performance typically with dozens of goals and metrics. But you can’t do everything at once. The challenge is to get people focused on the one thing that’s most important right now. If it moved in the right direction, it would eliminate a weakness (or capitalize on an opportunity) and improve financial outcomes. You improve that, and you win.

However, not every company clearly defines winning. A catalog of goals can pull the organization in multiple directions and stretch finite resources. Numerous goals can inherently be at odds, working against each other and for conflicting purposes. For example, a cost reduction goal might undermine an innovation goal requiring a significant investment.

window.addEventListener(‘load’, function() {

fbq(‘init’, ‘1098588566942656’);
fbq(‘set’,’agent’,’tmgoogletagmanager’, ‘1098588566942656’);
fbq(‘track’, “PageView”);

Source link

Continue Reading


Gen Z Is Making Ugg Boots Fashionable Again: Report



Ugg boots, the furry, sheepskin boots that defined the 2000s are back, apparently, with spiking interest and Gen Z cachet, according to data from shopping website, Lyst.

The site’s annual quarterly report that highlights the “hottest” 20 fashion brands was released on Thursday, and, as Insider noted, Ugg is on it for the first time since the index began in 2017.

“Gen Z shoppers are breathing new life into once dormant brands … with over 1.2 billion mentions on TikTok — Ugg’s influence is undeniable,” the report notes.

The boots were also sold out of stores during the holidays, it added.

Generation Z, or people born between 1997 and 2012, has demonstrated a penchant for bringing back old technology and trends, from flip phones to “vintage” headphones with cords.

But Ugg boots go back much further — the word “ugg” is actually a general term in Australia that means boots made from sheepskin and fleece, according to the BBC.

The company that created the “UGG” boot, Deckers Outdoor Corporation, is based in the U.S. and has tried and failed to trademark the word in Australia (where a court decided it was a generic word and thus could not be trademarked), the outlet added.

The company says the boots began to gain popularity in California in the 1980s. They were first featured on Oprah’s Favorite Things in 2000 (a huge brand-maker back then) and became “cherished commodities” early in the decade, according to Vogue.

The boots later gained prominence again with a fashion movement that prioritized “ugly” clothes, and have since become an unironic Gen Z favorite, per Insider. Kylie Jenner was also spotted wearing them in November.

window.addEventListener(‘load’, function() {

fbq(‘init’, ‘1098588566942656’);
fbq(‘set’,’agent’,’tmgoogletagmanager’, ‘1098588566942656’);
fbq(‘track’, “PageView”);

Source link

Continue Reading


%d bloggers like this: