ACH Network is the National Automated Clearing House (ACH) for electronic funds transfers. It processes financial transactions for consumers, businesses, and federal, state, and local governments. ACH processes large volumes of credit and debit transactions in batches. Short for "Automated Clearing House", ACH credit transfers include direct deposit for payroll, Social Security and other benefit payments, tax refunds, and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills.

The rules and regulations that govern the ACH network are established by National Automated Clearing House Association (NACHA). In 2018, the network processed 23 billion transactions with a total value of $51.2 trillion.

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Available in Unified API

TabaPay ACH is available via both our Unified API as well as via file-based exchanges.

For more information please look at our ACH via API guide.

Want to get enabled for ACH in Unified API? Email [email protected]

How ACH Payments Work

For each ACH payment from a payor's bank account to a payee's bank account, there are effectively two ACH transactions created and transmitted, namely an ACH Debit transaction and an ACH Credit transaction. In the case of a payor and payee having an account at the same financial institution, there is only one ACH transaction, which is often called an "on-us" transaction.

ACH Debit transaction

The payee's sending institution creates, batches, and transmits an ACH Debit transaction to the payor's receiving institution. The ACH Debit transaction instructs the receiving institution to withdraw and transmit the funds from the payor's bank account to the sending institution.

The receiving institution must send the return to the sending institution by the end of the following business day if it is unable to debit the funds from the payor's account, such if the account was not found, the account was closed, or the account was frozen.

For an ACH Debit transaction, the sending institution may be a third-party bank, rather than the payee's bank.

ACH Credit transaction

The payor's sending institution creates, batches, and transmits an ACH credit to the payee's receiving institution. The ACH Credit transaction instructs the receiving institution to credit the funds to the payee's bank account.

The receiving institution must send the return to the sending institution by the end of the following business day if it is unable to credit the funds to the payee's account, such if the account was not found, the account was closed, or the account was frozen.

For an ACH Credit, the sending institution may not be a third-party bank, rather than the payor's bank.

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Same Day vs Next Day

There are two types of ACH settlements.

Next-day ACH

ACH debits and credits are transactions that are created, batched, and transmitted typically by way of a financial institution's connection to the ACH Network.

With next-day ACH, each ACH transaction is cleared overnight. The sending institution (called the Originating Depository Financial Institution) sends the transaction to the receiving institution (called the Receiving Depository Financial Institution). When the receiving institution receives the transaction, it has until the end of the next working day to send a rejection to the sending institution. If the sending institution does not receive a return from the receiving institution by the morning of the third business day, then the transaction is deemed to be successful.

Same-day ACH

With same-day ACH, settlement can happen the same day. The sending institution can transmit files to the receiving institution the same day, expediting the processing of ACH transactions. The receiving institution still has two business days in which to send a return, so there will still be a delay of two business days in same-day ACH debit transactions. On the other hand, ACH credit transactions can be credited on the same business day as along as the receiving institution receives the ACH transaction within the correct window.

Transactions exceeding $1,000,000 and international transactions are not eligible for same-day ACH.

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API Integration

For how ACH API integration works, refer ACH via API

ACH Files

Refer to ACH File Overview by NACHA to understand ACH file formatting.

Follow ACH File Exchange for details on ACH Files with TabaPay.