What are ACH payments & how do they work?

You will learn;

  • What is ACH
  • Types of ACH payments and which is best for business
  • How to reduce late payments and save time and money with ACH
  • Is ACH right for your business - are you experiencing these payment problems right now?
  • 7 problems ACH Debit solves for businesses
  • Transfer times & costs associated with ACH payments
  • ACH Debit and GoCardless key takeaways 

What is ACH?

ACH (Automated Clearing House) is a network used for electronically moving money between bank accounts across the United States. It's run by an organization called Nacha (previously NACHA - National Automated Clearing House Association). It may also be referred to as the ACH network or ACH scheme.

ACH Key Points:

  • Payment processing via the ACH network has existed since the 1970s. 
  • ACH transferred over $61.9 trillion worth of funds in 2020, a year-on-year increase of almost 11 percent. 
  • Transaction types include government, consumer, and business-to-business transactions, as well as international payments.

What is an ACH payment?

An ACH payment is a type of electronic bank-to-bank payment in the US. These Payments go through the ACH network rather than through card networks such as Visa or Mastercard.

An ACH payment is also commonly referred to as an ACH transfer or ACH transaction.

ACH Network Key Points:

  • The ACH network is a US payments network only - ACH payments can't be made in the UK, Eurozone, or anywhere outside the United States. 
  • The ACH network is a bank-to-bank network, so you cannot process ACH payments from debit cards or credit cards.

ACH Categories

There are two main categories of ACH payments:

  • Direct Deposits
  • Direct Payments

Direct Deposit covers all kinds of deposit payments from businesses or the government to a consumer, including;

  • payroll
  • employee expense reimbursement
  • government benefits
  • tax and other refunds
  • annuities 
  • interest payments

Direct payment covers the use of funds for making payments, either by individuals or organizations. Direct payment ACH transactions are the primary focus of this guide and are variously referred to as; 

  • ACH payment
  • ACH transfer
  • ACH transaction

Types of ACH transfers

There are two main types of ACH transfers;

  • ACH credits 
  • ACH debits

They primarily differ according to the method of transfer between accounts;

  • ACH credits push the funds into an account - customers need to take action as they are responsible for initiating payments to your business.
  • ACH debits pull the funds out of an account - with the mandate in place, your business automatically collects payments from your customer's account without the need for any further action from the customer.

Learn more about the difference between ACH Debit & Credit

Say Goodbye to the Stress of Late Payments!

Using ACH Debit through GoCardless puts you in control of getting paid, meaning no more late payments. GoCardless improves cash flow, getting businesses paid 47% faster!

You can also automate your payment collection and bank reconciliation, reducing time spent on financial admin and relieving the stress of chasing late payments.

"Now, with GoCardless, our invoices are sent out and payments are automatically collected without the hassle of chasing clients for late payments. Our clients love GoCardless as it saves them more time and gives them more transparency." - Simon Kallu, Managing Partner, GrowFactor

Sign up for free and today and save time, money, and stress by getting paid on time, every time with ACH debit and GoCardless.


Are ACH payments right for your business - are you experiencing these payment problems right now?

ACH Debit payments through GoCardless are easy to set up and solve multiple problems for various types of businesses.

If you are a subscription-based business with many customers making recurring payments through credit or debit cards, then you are likely to be experiencing some of the following issues;

1. Expensive transaction fees - all card companies charge transaction fees of between 1.3% - 3.5%; on top of this, there are other fees for which businesses may be liable.

These fees can include monthly contract fees, authorization fees, data security fees, payment gateway fees, and more.

2. Failure rate of 10% - 15% - cards expire, get lost, and can be canceled, which means payments fail.

Not only does this create headaches in your business in terms of spending time working out who has and hasn't paid, but it often leads to the unnecessary loss of customers.

3. Time spent on financial admin - keeping track of who has and who hasn't paid can be a time-consuming task.

Businesses can spend up to 30 hours a month on bank reconciliation and chasing failed payments which divert resources and focus away from core business tasks.

If your business mainly collects one-off or recurring payments via invoicing by cash, check, or electronic bank transfer, you are likely to suffer from the following problems;

1. Late payments - your primary problem is that 'when' you get paid is entirely down to your customer.

This is true whichever way your customers choose to pay your invoices. 

Traditional invoicing puts your customer in control of sending the payment. As a result, late payments and cash flow issues affect 30% of US small businesses, who believe late payments impact their capacity to keep their companies open. 

"Late payments have a disproportionate impact on small businesses, leaving the backbone of the US economy saddled with past-due invoices." - https://www.pymnts.com/news/b2b-payments/2021/late-payments-disproportionately-impact-small-businesses/ 

2. Time spent on financial admin - raising and sending invoices can be time-consuming in itself. However, with the customer in control of sending the payment, manually checking for and reconciling bank payments, and chasing late payers also takes up significant amounts of time for invoice-based businesses.

3. Stress and strain - time-consuming financial admin practices and dealing with the effects of late payments cause stress for owners and put a strain on businesses.

Forrester notes that; "69% of US small business owners have been kept up at night by concerns about cash flow."


Benefits of ACH payments

1. ACH debit with GoCardless is cheaper than accepting card payments

ACH Debit is a bank account to bank account pull payment. That means that as the funds are transferred directly from one account to another and not routed through relatively expensive card networks, it is cheaper to transfer funds electronically.

"Paying with a low-cost method like ACH debit really makes a big difference for small businesses. It allows us to reduce costs, and, as a result, more money stays in the local economy." - Carrie Pollak Owner, Diaper Stork


2. ACH Debit puts you in control of when you get paid.

In contrast to invoicing, ACH Debit is a pull payment that gives you control over the transfer's date, frequency, and amount. 

Taking control of your incoming payments guarantees you have better cash flow in your business. Improved cash flow enables you to undertake realistic business planning and relieve the wasted time and stress of chasing late payments.

"Overdue invoices are virtually non-existent, and that makes us happy!" - George Ford Director, Veriphy.


3. Low payment failure rate, higher customer retention

Bank accounts do not expire or become lost, so the payment failure rate is significantly reduced compared to card payments.

A further benefit of using GoCardless for ACH Debit is in the relatively rare event of payment failure. GoCardless will attempt to pull the payment from your customer's bank up to three times, giving you the best chance of getting paid and keeping your customer.


4. No more chasing late payments, no more awkward conversations

With hardly any failed or late payments, you will be able to free up the time you were spending dealing with these issues.

You will now be able to focus on your core business activities without worrying about cash flow and having awkward conversations about late payments with your customers.


5. Save time and money with automation

You can save even more time with the integrations available within GoCardless, which automate large parts of your payment collection and bank reconciliation processes.

This automation enables you to reduce staff costs or redeploy to more productive business growth activities, saving you time and money.


6. GoCardless makes it super simple to start accepting ACH Debit.

In just a few clicks, you can create a mandate and send a link to your customer who completes the online form - you can then collect payments as required.


7. International payments are cheaper and easier

As ACH is only for bank transfers within the US, you have to find a different payment method to serve international customers.

However, with GoCardless, you can use ACH Debit to collect payments from overseas and have them paid directly into your US bank account in dollars.

As well as making it very easy to set up international payments, GoCardless also makes it cheaper.

Unlike banks that charge you higher rates, you get the best possible currency exchange rate with GoCardless and ACH debit using the Real Exchange Rate.


ACH Business Benefits: Summary

Collecting one-off and recurring payments with GoCardless and ACH Debit are cheaper than using cards. And, unlike invoicing, it puts you, not your customer, in control, which eliminates late payments entirely. 

With lower failure rates, higher customer retention, time-saving automation, and a super simple setup, GoCardless reduces stress and allows you to focus on critical tasks in your business, making life easier for both you and your customer.

Click here to find out more about making business and life easier with ACH Debit and GoCardless.

How long does an ACH payment take to process?

ACH transactions may take up to three working days to appear in your bank account.

Although NACHA states that almost all ACH payments are eligible for same-day processing, the time of day you submit the ACH file to your bank significantly impacts when the funds become available.

Learn more about ACH Payment Timings

Cost of ACH payments

The median internal cost for processing ACH payments is $0.29 per transaction.

However, the total cost associated with accepting ACH payments varies depending on several factors. Access our complete guide to ACH fees.

Alternatively, learn more about collecting ACH payments through GoCardless here.

ACH - Key takeaways

  • ACH payments are a type of electronic bank-to-bank payment only available in the US.
  • ACH payments differ from card payments like those made via Visa or Mastercard, as they are cheaper and enjoy a higher success rate.
  • ACH Debit payments are also preferable because they're accessible to many American consumers and increase customer retention.
  • ACH Debit is easy to set up with GoCardless and is worth consideration by any business taking recurring payments.
  • ACH payments through GoCardless enable you to serve overseas customers and receive payments directly into your US bank account using the best exchange rate.
  • Accepting ACH debit payments with GoCardless puts you in control of getting paid, eliminating the stress of late payments while saving you time and money. To learn more, click here.


"Bank transfers were usually the most common payment method that we had... that means clients remembering to pay... Payment by GoCardless is now standard policy for our payment terms. And that's because it will help our cash flow, it will help to get paid on time." - Saija Mahon, Founder & MD, Mahon Digital.