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What is an ACH transfer?

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

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 transfersIs it a debit or credit transaction?
Direct depositDebit
Automatic bill payDebit
Recurring deposit into an investment accountDebit
External transfer from one bank account to anotherCredit
Sending money to family and friendsCredit
Paying a bill manuallyCredit

9 steps to complete an ACH transfer

Although the specific steps may vary slightly depending on your bank, here’s generally how to conduct an ACH transfer.

  1. Log in to your bank account’s website or app.
  2. Look for an option that says Transfer or Add money.
  3. Select Add an external bank or a similar option.
  4. Enter the routing and account numbers from the external bank. Verify the account number if needed.
  5. Select if the external account is a checking account or savings account.
  6. Give the external account a nickname you’ll recognize.
  7. Submit the external bank’s information.
  8. Select the external bank as a funding source. and enter the amount of money you wish to transfer.
  9. Confirm the transfer.

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.

BankACH transfer feeProcessing time
ChaseNone1 to 2 business days
Bank of America
  • None for incoming
  • $3 for outgoing
  • $10 for expedited outgoing
3 business days
Wells FargoNone2 to 3 business days
CitiNone1 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.

4 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:

  1. 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.
  2. 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.
  3. 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.
  4. Wire transfers. Wire transfers are similar to ACH transfers, but there are some key differences. For instance, wire transfers are immediate, whereas ACH transfers take a few days. And while ACH transfers are typically free, wire transfers usually cost $10 to $35.

What’s the difference between an ACH transfer and a wire transfer?

A wire transfer is usually instant, but it comes at a high cost. Depending on the bank, you could pay up to $45 to send a wire transfer. An ACH transfer isn’t instant. Payments are processed in batches and can take up to three business days depending on your bank. The bright side? They’re almost always free.

If time is of the essence and you need to send money immediately, a wire transfer may be worth the extra cost. But if you’re in no rush, an ACH transfer may save you a lot of money.

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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