The ACH: What is it?

07.30.07 | Online Banking | 0 Comments | by junger

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Have you ever wondered what an ACH transaction is? I know I have.

The AC (Automated Clearing House) is a network of secure electronic financial transactions that basically runs all direct deposit, automated payment, e-checks and more in the country.

The ACH Network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system governed by the NACHA OPERATING RULES which provide for the interbank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities through which financial institutions transmit or receive ACH entries.

ACH payments include:

* Direct Deposit of payroll, Social Security and other government benefits, and tax refunds;
* Direct Payment of consumer bills such as mortgages, loans, utility bills and insurance premiums;
* Business-to-business payments;
* E-checks;
* E-commerce payments;
* Federal, state and local tax payments.

The number of ACH payments originated by financial institutions increased to 8.05 billion in 2002, up 13.6 percent from 2001. These payments were valued at $21.7 trillion. Including payments originated by the Federal government, there were a total of 8.94 billion ACH payments in 2002 worth more than $24.4 trillion.

Every time you pay a bill online, you take part in an ACH transaction. Every time you transfer money into your online savings account, the ACH is involved. Every time your employer direct deposits your paycheck, the ACH is involved.

Here's a good list (though potentially outdated) of banks that offer free ACH transfers.

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