Blog|5 min

What is ACH Credit?

Kelly Kipkalov
Bill.com, Sr. Director, SMB Product Marketing

An ACH credit is a payment that's "pushed" from one bank account to another using a U.S. banking network known as the Automated Clearing House Network (ACH network).

ACH credits are often called direct deposits, which might sound more familiar.

When an employer pays its employees by depositing electronic payments into their checking accounts every month, those are ACH credits. The employer pushes the funds out to the employee accounts.

By contrast, ACH debits are funds that are "pulled" in. In other words, the transaction is initiated by the payee (recipient) instead of the payor.

For example, when someone authorizes their mortgage company to "take" their mortgage payments directly from their personal checking account every month, those are ACH debits. The mortgage holder pulls those receivable payments into its own account.

This article covers what you need to know about ACH credit and how to take advantage of it for your company.

How does ACH credit work?

Every Automated Clearing House payment (ACH payment) runs through the U.S. clearing house system, a network of United States financial institutions. The network includes the Federal Reserve and is overseen by the National Automated Clearing House Association (NACHA.) The ACH network is primarily used to make domestic electronic payments between U.S. banks.

Each person or business has to authorize the funds transfer. Once authorization is complete, the initiating financial institution either pushes the funds out (an ACH credit) or pulls the funds in (an ACH debit.)

Those payments are batched together and processed by a clearing house that verifies the transfers. The funds are generally available to use between 2 and 5 business days later, but same-day ACH payments are becoming more and more common.

Businesses use ACH credits to deposit paychecks and benefits for workers, for example, and to pay recurring bills with B2B ACH transfers. They also use them to pay occasional bills, like paying an accountant to provide tax prep services once a year.

Companies like to use optional ACH debits to let customers "set it and forget it," paying their monthly bills automatically.

In each direction, whether sending or receiving funds, ACH payment processing is easy, cheap, and convenient.

Fees for ACH Debit Transactions and ACH Credit Transactions

When you pay someone by ACH credit, the processing fees are very low. You'll pay a very small amount as the sender—usually less than the actual cost of printing and mailing a check—and the business you're paying won't have to pay anything.

Vendors love companies that pay by ACH credit because, unlike credit cards, ACH payments are deposited in full. Vendors avoid costly fees and credit card rates without having to go to the bank to deposit funds.

In addition, the electronic transfers are processed in a way that's both easy and secure—especially when compared to physical checks.

But the best thing about ACH is how much time it can save.

Instead of printing, signing, and mailing a ton of physical checks every month, you can pay those bills digitally with a few clicks. You can also manage your recurring bills through automation so you only have to get approvals for the unusual things. 

ACH vs. eCheck: What is the Difference?

An eCheck is the same as an ACH debit. That's when you're pulling funds into your account.

Consumer businesses use eChecks as a service to their customers. An individual customer can set up their account to make automatic payments every month. The customer knows their payments will be timely, and the business enjoys all the benefits of recurring billing and automatic debit of those receivables.

ACH vs. Direct Deposit: What is the Difference?

Direct deposit is just another term for an ACH credit. That's when your ACH transaction is pushing funds out of your account.

Some of the most common types of direct deposits include electronic tax refund payments from the IRS and social security payments for retirees.

By comparison, an eCheck or ACH debit works like a withdrawal, pulling funds from another account after receiving payment authorization.

Bill.com Difference

Bill.com is more than an ACH service provider. It's an intelligent business payments platform.

When you fill out your banking information in the Bill.com app, your vendors don't see it. Those vendors fill out their own account information, and the system lets you formally associate with each other without sharing that information.

Merchants and vendors can email invoices directly to the system. Bill.com sends you a notice that the bill arrived, and your Intelligent Virtual Assistant (IVA) reads the invoice, entering the details into the system for your review. All before you've ever lifted a finger.

You can set up different governing workflows for different bills and accounts. So you can pay your utilities bills every month automatically but require 2 separate approvals to handle a large, one-time purchase. Whatever rules you set up, Bill.com routes each bill through the right billing process.

And, when you do need approvals, you can request them remotely. The Bill.com app lets your whole finance team work wherever it needs to.

Corporate finance teams love it for the extreme efficiency and convenience of digital organization. All communication is stored in one place, from invoice to questions to bill payment, and payments go out in batches that make your monthly close a snap.

Accountants love it for the transparency of the permanent audit trail that captures every touchpoint and transaction. In addition, Bill.com syncs with most major business accounting software, keeping your books up to date automatically and reducing the chance of human errors.

Security teams love it because every charge, authorization, and transaction runs through Bill.com. Your account is debited and credited without sharing your information.

Better yet, with Bill.com you can make ACH payments or virtual credit card payments, send wire transfers, or even send paper checks (we'll print and mail them for you) from one convenient system.

Set up ACH payments in Bill.com today with our risk-free trial.

"Bill.com helps us efficiently manage large volumes of payments in a controlled environment - which our auditors love! Our vendors appreciate the ability to securely provide banking details through a PCI compliant platform." — Kassie Hargurth, Head of Accounting, ClearCover


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