What is ACH?

ACH or, Automated Clearing House, is a widely used digital technology for transferring funds from one bank account to another. It is the most common technology used to transfer funds in the United States. NACHA is the organization involved in the transfer of funds through ACH. NACHA stands for National Automated Clearing House Association.

What is a Clearing House?

A clearing house is an intermediary between parties exchanging goods, in our case, a check. When person X wants to send funds to person Y using a check, the clearing house is the middle man that executes the receipt and delivery of that check.

If ACH is being used, funds from the Sender’s account are electronically transferred to the Recipient’s account. ACH doesn’t require there be a physical exchange of cash or checks. Thus the term “Automated” in the title. The middle man in this case is intangible and automated. These transactions are typically settled within 3-4 business days.

Automation is the standard today. It is the expectation. “Automated” does not mean the same thing as instant, though. ACH does not guarantee funds in less than 3 business days, nor does it offer real time status updates on the check.

Digital Checks, however, provide instant bank verification and safer encryption.

About Author: Nicholas Bragg & The Checkbook Team