Automated Clearing House | Meaning and Definition

What is Automated clearing house?

An Automated Clearing House (ACH) is a computer network that works toward handling online financial transactions. The ACH network may be used to transmit or receive payments by any entity which can include businesses, government organizations, or individuals. Companies typically pay their employees via direct payments using ACH. Funds are sent from one bank account to another over an ACH network. You could start a transfer from your group’s bank account to your company’s bank account if you are a company and need to make payments to your employees. 

An Originating Depository Financial Institution (ODFI) and a Receiving Depository Financial Institution (RDFI) are involved in every ACH transaction that takes place.

ACH payments take about 3 to 5 business days to process. In 2016, NACH made an attempt to start same-day payments as technology evolved and the need for speedier transactions rose. Employers may now choose between same-day, next-day, and two-day pay-outs. Weekends and national holidays are not included in the processing time. It is feasible to halt NACH payments, but you must do it within three business days of the planned payment date by contacting your billing department or the bank that starts your workers’ paychecks. For this, you will have to provide your organization’s name as well as the amount paid.

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