How Long Does an ACH Transfer Take? ACH Transfer Times

ACH transfer times vary depending on the bank, with some banks processing ACH payments within 1-2 business days and others taking 3-6 business days. In an ideal world, funds would transfer instantly. However, ACH transfers require an elevated level of monitoring because there are several moving parts throughout the duration of a transfer.

Whether you’re currently waiting for funds to transfer or would simply like to know more about ACH transfer times, we’ve got you covered below!

What Is an ACH Transfer?

An ACH transfer is an electronic funds transfer (EFT) that processes through the Automated Clearing House (ACH) Network. Governed by the National Automated Clearing House Association (NACHA), the ACH Network links United States-based financial institutions and facilitates transfers between these institutions.

During an ACH transfer, the two major involved parties are the ODFI and the RDFI. The Originating Depository Financial Institution (ODFI) represents the bank of origin. Meanwhile, the Receiving Depository Financial Institution (RDFI) represents the reacting bank. Below explains the step-by-step process of an ACH transfer:

1. The customer authorizes the merchant to debit or credit their account.
2. The OFDI sends an ACH file to the ACH operator.
3. The ACH operator sends the ACH file to the RDFI.
4. The payment is processed by the RDFI.
5. Funds are deposited to or withdrawn from the ODFI.

Yes. Depending on the party initiating the ACH transfer, it can be an ACH credit or ACH debit.

In the event of an ACH credit payment, the sender pushes funds from their account to another account through the ACH Network. The payer transfers funds directly into the receiver’s accounts without a formal request a payment. These types of ACH transfers are refundable.

Meanwhile, an ACH debit transaction occurs when the payee initiates the payment. These types of transactions allow merchants to pull money from their customers’ accounts, as opposed to pushing money.

How Long Do ACH Transfers Take?

ACH processing times have a standard or next-day fund delivery time. The former is cheaper (or sometimes free) and arrives within three to six days, whereas the latter usually costs a bit more and arrives the next day. However, this applies only to ACH debit transfers. ACH credit transfers usually require one or two days for processing. It’s worth noting that the participating bank is a huge factor in how fast an ACH transfer reaches settlement.

Here’s a detailed explanation of how ACH debit transfers process at most banks:

• Day 1: You submit an ACH file to your bank, which must include the other party’s bank account number and routing number. Your bank processes it and sends it to the ACH Network.
• Day 2: The file is available to the RDFI. After they receive it, the funds are credited from the RDFI.
• Day 3: If there is a problem, the RDFI must notify the ACH Network within 48 hours of the transaction date.
• Day 4: As soon as the ACH Network sends a notification detailing a problem, your bank may contact you. If there’s no problem, the funds are debited to the ODFI.

Typically, banks process ACH debit payments three times a day and have cut-off times. Because this varies by bank, be sure to familiarize yourself with your bank’s ACH schedule.

Why does ACH take so long?

The involvement of so many parties is one of the reasons ACH payment processing is so a bit slower than other payment methods. Payment data is sent to the ODFI, which then sends it to the Federal Reserve. Once the Federal Reserve receives and processes the data, it sends the ACH transaction to the RDFI.

Typically, a transfer can be completed within three to six business days. However, should an ACH return code generate, the RDFI must notify the payment processor within 48 hours.

Can You Collect an “Instant” ACH Payment?

Unfortunately, instant ACH payments are not possible, however, same-day transfers are available if you wish to accelerate the transfer time. While not exactly instant, the funds will arrive within a few hours on a business day. NACHA also regularly updates its same-day system, so instant ACH payments are not outside of the realm of possibilities in the future.

Can You Expedite an ACH Transfer for Same-Day Processing?

Since its inception in 2016, the same-day ACH transfer system is regularly updated by NACHA. In 2021, NACHA expanded the operating hours by an additional two hours. In 2022, NACHA increased the same-day ACH transfer limit from $100,000 to $1 million per transaction.

The best way to ensure your payments are transferred swiftly is by adhering to NACHA’s best practices:

1. Obtain proper approval from customers about debiting or crediting their accounts.
2. Validate the bank routing number.
3. Look out for fraudulent checks.

How are ACH Transfers and Wire Transfers Different?

When distinguishing ACH transfers from wire transfers, the most noticeable difference is the transfer time, availability, cost, and security.

	ACH Transfers	Wire Transfers
Availability	Only available domestically	Available for domestic and international transfers
Transfer Time	The ACH transfer time, especially for debit payments, can take up to six days	Within 24 hours of initiating the payment; five days for international transfers
Cost	ACH transfer fees are between $0-$10	Wire transfer fees are between $25-$50
Security	ACH transfers have many checks and balances in place to catch any errors	Wire transfers work at a faster pace, sacrificing security for speed

Are There Any Limitations of ACH Transfers?

While affordable and convenient, ACH transfers are prone to the following limitations:

• Transfer Amount Limit: Much like other transfers, ACH transfers have a monthly and daily transfer amount limit.
• Savings Account Transfer Limit: ACH transfers from an individual’s savings account are limited to six per billing cycle, regardless of the amount sent.
• Cut-Off Time: You must make transactions within certain timeframes for a quick processing time. Each bank had its own cut-off times set throughout the day.
• Insufficient Funds Fee: You must have sufficient funds in your accounts before making an ACH transfer, otherwise you’ll be subject to a penalty fee.

Are ACH Payments Secure?

NACHA requires payment processors to comply with its regulations. If you plan to accept ACH payments, your payment processor will put standards in place to create a secure, compliant environment for these transactions. Some of these standards include:

• Merchant Registration: Processing ACH payments requires merchants to validate their business and identity with banks.
• Micro-Deposit Validation: A user’s bank account may be debited or credited with two “micro-deposits” after establishing a relationship with a merchant. After verifying these deposits, the user can send or receive money.
• Tokenization and Encryption: Tokenization and data encryption are two of the most common ways payment processors protect their customer’s sensitive data. Most processors implement these security features as part of their ACH processing.

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While the above-mentioned methods help you keep your ACH payments secure, that’s not always possible. Fraud can happen, even to businesses using the most advanced security features available. However, being aware of common fraudulent scenarios (listed below) can help you avoid them.

• Fraudsters access customer credentials, generate an ACH file in the name of the victim, and withdraw funds before the victim realizes the fraud.
• After accessing a retail customer’s credentials, criminals set themself as automatic payment recipients.
• Insider threats involve the company or bank employees modifying ACH files to have funds sent to them instead of the intended recipient.
• Fraudsters use the time lag in transactions to exploit a variety of check kiting, which involves juggling funds between accounts at different financial institutions.

Do ACH Transfers Benefit Your Business?

When compared to physical checks, ACH transactions offer great benefits in terms of speed and convenience. Another benefit is that the ACH Network can facilitate recurring payments. You can set it and forget it!

Furthermore, ACH transfers aren’t subject to the same security risks as wire transfers. With wire transfers, there’s no waiting time for verification and they’re not reversible. Because of this, cybercriminals often request fraudulent payments via wire transfer, not ACH transfer. Once the victim realizes they were duped into sending a wire transfer to a fraudster, they are unfortunately left with no recourse.

ACH Payment Processing Time: Closing Thoughts

Due to their convenience and notoriously low processing rates, ACH transfers are an excellent way to make an electronic funds transfer from one United States-based bank to another. While ACH transfers may take longer than other forms of funds transfers, this is due to the security measures enforced by NACHA. Business owners prioritizing security should consider accepting ACH payments—the benefits far outweigh the limitations!