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What is an ACH transfer?

A reliable way to transfer money electronically. But how does it work?

Updated

An ACH transfer is a way to electronically move money from one bank account to another. It’s often easier than mailing a check or handling cash.

But what is it exactly? Here’s a cheat sheet on ACH transfers—what they are, how they work and what you can expect when you make one.

What is an ACH transfer?

ACH transfers are made by the Automated Clearing House — a system that processes ACH transfers in batches on a first-come, first-served basis. Unlike wire transfers that are processed in real time, ACH transfers are usually processed in batches three times daily.

There are two major types of ACH transfers:

  • ACH debit transactions. This type of transaction most commonly happens when you set up recurring payments with bill collectors and they’re able to pull money from your account on a regular basis. It’s passive because you don’t have to send the money yourself — instead, you give businesses permission to do it for you.
  • ACH credit transactions. This type of transaction allows you to send money to friends, family, other bank accounts and bill collectors. Instead of letting businesses “pull” money from your accounts as needed, you “push” money to other people on an as-needed basis.
Common types of ACH transfers Is it a debit or credit transaction?
Direct deposit Debit
Automatic bill pay Debit
Recurring deposit into an investment account Debit
External transfer from one bank account to another Credit
Sending money to family and friends Credit
Paying a bill manually Credit

How long does an ACH transfer take?

Based on rules set by the National Automated Clearing House Association, banks have until the next business day to clear ACH debit transactions and one to two business days to clear ACH credit transactions.

Each bank decides how soon they want to process transactions within those limits. For example, some banks may process same-day payments while others hold your funds for a set time.

How much do ACH transfers cost?

ACH debit transfers for automatic bill payments and direct deposits are generally free. But you may pay a small fee if you need to expedite a payment.

ACH credit transfer fees vary from bank to bank. You may pay a small fee to send an ACH credit transfer, but you usually won’t pay anything to receive one.

Here’s a breakdown of how much ACH transfers cost at the four largest financial institutions in the US.

Bank ACH transfer fee Processing time
Chase None 1 to 2 business days
Bank of America
  • None for incoming
  • $3 for outgoing
  • $10 for expedited outgoing
3 business days
Wells Fargo None 2 to 3 business days
Citi None 1 to 3 business days

Limitations to ACH transfers

ACH transfers help you get paid faster, pay your bills on time and conveniently move money between external bank accounts. But there are a few things you should watch out for:

  • Transaction limits. There may be a cap on how much money you can send or receive daily, weekly or monthly. Some banks may impose a limit on how much you can transfer at one time.
  • Location. Your bank may not let you initiate ACH transfers to financial institutions outside of the US.
  • Business hours. Banks process ACH transfers at different times during the day — and none of them process payments outside of business hours. Missing the deadline could delay your payment and result in late fees.

ACH transfer alternatives

If you’re looking to bypass the time and potential costs required for ACH transfers, here are some alternatives you could use:

  • Zelle. If your bank supports person-to-person payments, there’s a good chance it uses Zelle. This platform allows you to send money to family and friends for free using your bank’s mobile app. In most cases, the transfer is instantaneous.
  • Venmo. This mobile app makes it easy to electronically send money to friends and family. You can send money from your linked bank account or debit card. Or, send funds directly from your Venmo account balance. But you’ll pay a small fee if you use a credit card.
  • PayPal. This site lets you send money to merchants and individuals alike. It’s free to send personal payments from a linked checking account. But expect to pay a fee if you need to use a debit or credit card or you’re sending an international payment.

Need a bank account to transfer money?

Name Product Minimum deposit to open ATMs Out-of-network ATM fee
HSBC Premier Checking
$1
Free to use at all ATMs in the US
$0
Get a 3% cash bonus, up to $600 (max. $100 per month) during first six months after account opening. Must open HSBC Premier checking account through offer page by September 30, 2020, and set up qualifying direct deposits into the new account. Conditions apply. Deposit products are offered in the US by HSBC Bank USA, N.A. Member FDIC.
BBVA Online Checking
$25
No ATM fees nationwide at more than 64,000 AllPoint, participating 7-Eleven and BBVA USA ATMs
$3
A full-service account with convenient, surcharge-free access to two massive ATM networks, plus up to a $250 signup bonus when you meet deposit requirements
Axos Bank Essential Checking
$0
ATM fees reimbursed at any ATM nationwide
No fees. Unlimited domestic ATM fee reimbursements.
Axos Bank Rewards Checking
$50
ATM fees reimbursed at any ATM nationwide
$0
Earn up to 1.25% APY while enjoying a suite of digital tools for smarter money management.
Aspiration Spend & Save Account
$10
55,000 free in-network ATMs
$0
Deposits are fossil fuel-free. A spend and save combo account with unlimited cash back rewards and deposits insured by the FDIC.
N26
N26
$0
Fee-free ATM withdrawals at Allpoint ATMs
$0
A digital bank account with no hidden fees, no minimum account balance and no maintenance charges.
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$
$
months
Name Product Interest rates (APY) Fee Minimum deposit to open Interest earned
American Express® High Yield Savings
0.60%
$0
$0
Enjoy no monthly fees and a competitive APY with this online-only savings account. Accounts offered by American Express National Bank, Member FDIC.
Axos Bank High Yield Savings
0.61%
$0
$250
No monthly maintenance fees. No minimum balance requirements. Interest compounded daily.
Aspiration Spend & Save Account

1.00% on $0 to $10,000 but you’ll need to be enrolled in Aspiration Plus and make at least $1,000 in debit card purchases a month
$0 per month or $7 per month for Aspiration Plus ($5.75 per month if you pay annually)
$10
Deposits are fossil fuel-free and insured by the FDIC. Enjoy a spend and save combo account with unlimited cash back rewards and a $100 bonus when you spend $1,000 in your first 60 days.
CIT Bank Money Market
0.55%
$0
$100
A savings account with a higher-than-average rate and minimal fees.
Continental Bank High Yield Savings
0.45%
$0
$1
Continental Bank High Yield Savings account, offered through SaveBetter, has a $1 opening deposit and earns 0.45% APY.
SoFi Money
0.25%
$0
$0
SoFi Money® is a cash management account that charges no account fees to save, spend, and earn cash back rewards when you spend on brands you love.
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Bottom line

ACH transfers are a convenient and cost-effective way to electronically transfer money to another financial institution. They’re often free, but you may pay a small fee to send ACH credit transfers depending on your bank.

Thinking an ACH transfer may not be for you? Explore other ways to send money to a bank account.

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