What is ACH Transfer? Know Complete Process and Benefits

What is ACH Transfer

Automated Clearing House or ACH is one of the most popular methods for transferring money electronically from one bank account to another. ACH transfers offer a convenient and cost-effective way to move funds between bank accounts. ACH can be used for various transactions like direct deposit of paychecks, monthly or annual debit towards a loan or any other payout, interest credit etc. 

However, the benefits of ACH are very different from the benefits of Wire Transfer so you don’t need to get confused between the two. Let’s understand in detail about ACH, its uses and applications, process, merits and demerits. 

ACH Transfers: Movement of Funds

ACH network facilitates electronic transactions between banks or financial institutions. ACH transfers are electronic funds transfers that allow you to move money from one bank account to another, whether it’s for personal or business use. These transfers can be used for various purposes, such as direct deposits, bill payments, and even person-to-person transfers. In order to initiate the movement of funds through ACH you need to activate the ACH e-mandate initiated by the concerned merchant. Once you activate the mandate for a particular transaction the money will be moved directly to the concerned party without any further commands.

How ACH Transfer Works?

ACH transfers involve certain steps in a transaction in order to transfer the funds to the beneficiary. After initiating the transaction the bank asks you to authorise the same through its secure portals. When you accept the mandate it then gets processed by the bank. Let’s understand each step involved in it:


ACH Transfer is required to be initiated by the sender. At this step, you need to create the mandate and authorise it. This can be done through various channels, including online banking, mobile apps, or through a payment service provider. If you are availing any loans or advances from another bank or financial institution then they may redirect you to the bank’s website in which you will accept the mandate. 


When you perform an ACH transfer you need to fill in all the necessary information, such as the recipient’s bank account number, remarks, the amount to be sent, and the purpose of the payment. This information is used to create an ACH entry. In order to open this portal you need to login through your net banking account credentials. 

ACH Processing

Once the ACH entry is created, it is submitted to the ACH network. The network then processes the transaction, verifying the account details and checking for any potential issues. At every step, you need to provide one-time passwords if you are doing transactions through online banking. You can also use your ATM-cum-debit card or Virtual/UPI ID details to authorise the transaction and get it processed.


ACH transactions are typically settled in batches, rather than in real-time, just like NEFT. However, the time frame is quite different from NEFT transactions. In this, the transactions are grouped together and processed at specific intervals, usually once a day. The settlement process involves transferring funds from your bank to the recipient’s bank. You will get a debit message from your bank and credit confirmation from the beneficiary. Remember that you need to maintain sufficient funds in your account while performing ACH transfers. If an ACH debit attempt is made by the bank and the account doesn’t have sufficient funds then you may have to pay extra charges and your credit history/CIBIL score might be affected. 


After the settlement process is complete, both the initiator and the recipient receive confirmation of the ACH transfer. This confirmation may be in the form of a transaction receipt or an entry in their bank statement. Usually, the bank shares all such information through SMS, or e-mail. In case you did not receive any communication from the bank regarding it then you should contact your bank immediately. 

Also Read: Things to Consider while Transferring Money Abroad

Benefits of ACH Transfer

ACH Transfer allows you to make hassle-free transactions with almost zero fees subject to the terms and conditions. You just have to authorise the mandate and the bank will take care of the rest. Let’s understand some of the major benefits of ACH Transfer:

Advantages of ACH Transfers:

  • Cost-Effective Transfer: ACH transfers are often more affordable than other payment methods, such as wire transfers or cheque payments. Many banks and financial institutions offer ACH transfers at little to no cost. In some cases, ACH transfers are the only available mode of payment offered by the beneficiary due to its multiple benefits. 
  • Convenience: ACH transfers can be initiated and scheduled online, making them convenient for both individuals and businesses. Recurring payments, like monthly bills, can be automated through ACH. You just need to log in to your net banking account and set the mandate for transfers. You can also cancel the mandate at any time subject to the terms and conditions of the bank. 
  • Security: ACH transactions are subject to stringent security protocols to protect against fraud and unauthorised access. This makes them a secure way to transfer money. There are multiple steps involved while setting up and authorising an ACH bank transfer. 
  • Speed: While ACH transfers are not as instant payment systems as other modes such as UPI and IMPS, they are still relatively quick, with funds typically clearing within 1-2 business days. For automated payments like EMIs, ACH network transfers are the best-suited mode as you don’t need to do anything once you authorise the mandate irrespective of the tenure of regular payments. 

Also Read: How Exchange Rate Works and Who Governs the Rates


What is the difference between an ACH Transfer and a Wire Transfer?

ACH transfer is used to process direct payments or deposits. The transaction in ACH is completed through a clearing house. On the other hand, you can make direct movement of money through wire transfers from one bank account to another. ACH are mostly free but Wire Transfers are chargeable.

What are some examples of ACH transfers?

Monthly payouts to employees, EMI debit etc are some examples of ACH.

Are ACH and ECS the same?

Both ACH and ECS (Electronic Clearing Systems) are modes of automated electronic fund transfers.

ACH transfers have revolutionized the way we move money in the digital age. It is an affordable, convenient, and secure mode of payment which makes it a popular choice for individuals and businesses. Whether you’re paying bills, receiving payments, or simply transferring money between accounts, ACH transfers offer a reliable and efficient solution.

To know more about the payment modes, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience. Follow our social media handles on Twitter, LinkedIn and Instagram

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About Shekhar Suman

Shekhar is a versatile writer with a passion for sharing knowledge and creativity. With expertise in crafting informative blogs on study abroad and finance, Shekhar helps readers navigate the complexities of education and financial planning. Most of his writings blend the practicality of finance and the beauty of language, making a meaningful impact in both spheres. Beyond his professional pursuits, he finds solace in the writing Shayari.

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