Whether you know it or not, when you pay for something with a check or debit card, you are taking advantage of ACH. So what is ACH?
This often-used acronym actually stands for Automated Clearing House. It’s an electronic network for financial transactions in the United States that basically moves money between bank accounts (or more accurately credits and debits accounts). So, when you present your debit card or write a check to pay in a store, the store sends a request for the amount to their payment processor, who then sends it to the clearing house. The clearing house sends a request to your bank, who then takes the amount from your account, and sends it back through the clearing house.
It’s a convenient and fast way to pay for things, but you should be aware that it could now be even faster.
As of September 15, 2017, certain transactions could clear your account sooner than in the past, with the introduction of same-day processing of ACH payments. Formerly, ACH credits to your account (such as direct deposit) posted multiple times a day, while debits (payments from your account) were processed only once a day – usually overnight.
On September 15, that changed and debit transactions are now processed multiple times per day. That means if you write a check and it’s converted to an ACH transaction, or you authorize a bill payment by phone, it could come out of your account during the same business day. So you will want to be sure you have sufficient funds in your account at the time you make a payment to avoid inadvertently overdrawing your account.
There are benefits to same-day ACH processing. Moving money between accounts you have at different financial institutions will now be faster and making bill payments on time will be easier. Just make sure you have enough money in your account to cover those faster-moving payments, because overnight processing isn’t something you can count on anymore.
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