What is Ach Transfer?
The evolution of technology has brought about various means of sending and receiving money across the globe. From mailing checks and walking around with liquid cash to electronic transfers, convenience has never reached such heights.
One of the many ways is sending money through ACH otherwise known in full as Automated Clearing House system. It allows bank to bank transfers between companies and individuals as well as other entities. Find out more about this transfer system.
An All-round Look at ACH Transfer
As mentioned earlier, ACH in full stands for Automated Clearing System and is credited for all inter-bank electronic funds transfer. Other third-party money transfer services like PayPal take advantage of the ACH network just as the government does.
Other services in the banks like debits and credits also use ACH. Debit which is a transaction involving an external party drawing funds from your account. Such may be a pre-billing agreement with a company or service you subscribed with.
The other is a credit transaction. This type of transaction adds money to your account. Such can be your salary or a payment into your account.
So, How Long Does it Take for an ACH Transfer to Sail Through?
Transactions involving ACH take no more than 3 business days to be finalized. However, a number of financial institutions deliver within 1 business day.
The Difference Between Wire Transfer and ACH Transfer
An ACH transfer is more like a wire transfer. However, as much as there might be similarities between the two, there are notable differences that arise.
One of the differences is in the price. The prices charged on sending money are fair. Most of the times, it would cost you no more than a dollar to send and free to receive. You should, however, confirm with your bank for the charges.
As for wire transfers, it would cost you around $10 and $35 if you intend to transfer within the country. If you move money internationally, it will cost you $50.
Another difference is the time it takes for the transfer. ACH transfers take quite some time compared to wire transfers which take minutes to hours. The reason for the delay is because ACH transfers are handled in groups. With wire transfers, the funds are moved even before the money reflects in the recipient’s account.
With this information, it is important to tread cautiously and compare the type of transfer you would like to use depending on your needs.
Restrictions Associated with ACH Transfers
There are a number of restrictions when moving money between banks with ACH. The first is the limits you will encounter. There are monthly and daily limits which if surpassed could cost you extra. So, check with your bank’s policies before depending on that account.
The other limit comes in the form of federal law limits. The law limits you to a maximum of 6 transactions per month from your savings account.
Also, it is important to keep an eye on your account balance as it might fall short of covering your transfer fees. This means that you could fall behind in bill payments.
Then there is the issue of business days. You need to keep in mind that weekends are not business days. So, if you initiate a transfer on Friday, you will have to wait until Monday so plan ahead.
Requirements for an ACH Transfer
Sending money with ACH is simple. All you need is the name of the bank you intend to send money to, the account number of the recipient and the ABA routing number.
The above information is located at the bottom of the check. The bottom left contains a bunch of numbers with the details. The first 9 are the ABA routing number and the following 12 are the account number.
The last 4 are the check number isn’t important in ACH transfers. Armed with this information, you can go ahead and start an ACH transfer.
On the recipient’s side, you will need to send the sender the above information. That is the routing number and the bank account number. You can also opt for other third-party services such as PayPal. Though simple and quick, you may be forced to contend with 3 to 5 business days of processing.
Security of ACH Transfers
In general, ACH transfers are secure and safe to use when it comes to sending money. Frauds are rare to come across. However, a gap that could be exploited comes when you have to send over your bank details.
With such sensitive information on the line, you need to ensure that you trust the recipient. In the event that you come across fraudulent transactions, you will have to part with a $50 fee for reporting the same in 2 days. If you take a period of 60 days, prepare to part with $500.
With such possibilities, you need to ensure that you keep a close eye on your bank balance to ensure all transactions are accurate. That is of course if you want to see a $500 deficit in your account.
There are limited occurrences of reversals which could happen for one reason or the other. For example, your employer could have sent you the wrong amount. So, instead of you going through the pain of manual reversal, the sender can initiate a reversal and the money goes back to them.