Overview[]
The Automated Clearing House (abbreviated as ACH) is a U.S.-based electronic funds transfer system consisting of four networks — the American Clearing House Association, the Federal Reserve, the Electronic Payments Network (EPN), and Visa. The system processes transactions involving private and government deposits and payments pursuant to rules of the National Automated Clearing House Association (NACHA).
An ACH comprise a centralized electronic funds transfer system that serves institutions rather than individuals, Instead of having checks sorted and physically dispatched to the debiting bank, an ACH receives, sorts, and distributes payment information on magnetic tape, which instructs banks to debit and credit accounts at a specific time.
An ACH is commonly used by large organizations for direct deposit of payroll "checks" and for collecting preauthorized consumer payments, such as insurance premiums and mortgage payments,
Payment transactions initiated by individual consumers using such services as telephone bill payment also can be handled through an ACH network. As an alternative to the use of magnetic tape, an ACH can move data directly between computers via a telecommunications network.