ACH Transfers: How They Work

An ACH transfer is an electronic money transfer between banks that allows money to be pulled from an account or to be 'pushed' online to accounts at other banks.

Spencer TierneyMay 20, 2019
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An ACH transfer is one of the main ways to send or receive money online. Automated Clearing House transfers account for the online bill payments you make and the direct deposits you receive, along with other transfers. Here’s a guide to how they work.

» Want to compare options? See the best ways to send money

What is an ACH transfer?

An ACH transfer is the electronic movement of money between banks through the Automated Clearing House network, one of the biggest U.S. payment systems.

An ACH transfer is an electronic, bank-to-bank transfer processed by the Automated Clearing House network.

The types of transfers include external funds transfers, person-to-person payments, bill payments and direct deposits from employers and government benefit programs. (Business-to-business payments are another one.) For sending money to friends and family, many transfer providers — including banks, Zelle and third-party apps like PayPal and Venmo — use the ACH network.

Types of ACH transfers

ACH transfers are processed in two ways, which vary in delivery speed and cost:

  • ACH debit transactions involve money getting “pulled” from an account. When you set up a recurring bill payment, for example, the company you’re paying can pull what it’s owed from your account each month.

  • ACH credit transactions let you “push” money online to accounts at different banks, either accounts you own or friends’ and family members’ accounts.

How long it takes

Delivery of ACH transfers can take several business days, meaning days that banks are open. Unlike the real-time processing of wire transfers, ACH transfers are processed by a network operator in batches only three times a day.

Delivery can take several business days.

Financial institutions can choose to have ACH credits processed and delivered either within a business day or in one to two days. In contrast, ACH debit transactions must be processed by the next business day. These timelines are based on rules from the National Automated Clearing House Association, the trade group that oversees the network. Upon receiving the money, a bank or credit union might also hold these transferred funds for a period of time, so the total delivery time varies.

NACHA made a rule that ensures banks can process payments the same day they’re sent, but it’s up to each bank whether it charges you for expediting a payment.

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What it costs

ACH debit transfers, including payroll direct deposits and most bill payments, are typically free. If you need expedited bill payments, there can be fees.

ACH transfers such as bill payments tend to be free, while transfers between linked accounts at different banks are either free or about $3.

For ACH credit transfers, banks might charge a fee of around $3 for sending money between accounts that you have at different banks, but many offer these so-called external funds transfers for free. There’s usually no fee to receive them. Here's a look at three online banks and their transfer fees and terms:

Alliant Credit Union High-Rate Checking
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  • ACH transfer fees: None.

  • Approximate delivery times: 1-2 business days.

  • Bonus features: 0.25% APY for checking.

Discover Bank Cashback Debit
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  • ACH transfer fees: None.

  • Approximate delivery times: Up to 4 business days.

  • Bonus features: Cashback checking rewards.

Ally Bank Interest Checking Account
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  • ACH transfer fees: None.

  • Approximate delivery times: Up to 3 business days.

  • Bonus features: 0.10% APY on checking.

Person-to-person payments that you initiate through your bank or third-party apps such as PayPal can cost a small fee, depending on the platform and payment method.

» See what your bank charges: Fees to send money online between banks

Wire transfer vs. ACH transfer

Although ACH transfers cost a few bucks at most, sending a bank wire transfer within the U.S. tends to cost from $20 to $30, and there’s usually a fee to receive one. The wire network, however, processes transactions in real time, so you can generally expect U.S. wire transfers to be delivered within hours, if not minutes. Because of its cost and speed, a wire transfer is best for large-sum and time-sensitive transfers, either in the U.S. or abroad.

» Read more about how wire transfers work

Zelle: A nearly instant payment option

Zelle, available in many bank apps, lets you deliver money to friends and family members’ bank accounts generally within minutes. You can also transfer between accounts you own at different banks. Zelle doesn’t charge fees, but some banks might. Created by the bank-owned technology company Early Warning Services, the payment app works directly with over 100 banks and credit unions.

Normally, electronic transfers are processed within days and then funds become available to a recipient, but with Zelle money is moved to a recipient within minutes and the transfer is finalized later through normal ACH processing.

Restrictions on external funds transfers

Sending money via ACH between banks can be convenient, but there are some limitations, including:

  • Amount limits: You may have a daily and monthly cap on how much money you can move.

  • Cutoff times: After a certain hour, a transfer won’t be processed until the next business day. If you send money on a Friday, for instance, processing might not start until the following Monday.

  • Fee for insufficient funds: If you don’t have enough money in your account, your bank might charge you a fee and stop the transfer.

  • Not often available for international transfers: Your bank probably won't allow consumer ACH transfers to banks outside the U.S.

  • Transfer limits for savings accounts: A law requires banks to limit the combined number of certain withdrawals and transfers from savings accounts to six per month. (If you’re sending over the limit, consider opening a second account. Compare NerdWallet’s best savings accounts.)

ACH transfers can be a cheap way to move money, but if you're the one sending funds, check out your bank’s policy first. This will help you avoid any fees, unexpected processing delays and potential limits so you can make the most out of this service.