Posted by NationalACH on Aug 19, 2010

Electronic Funds Transfer ACH Network

Electronic funds transfer (EFT) systems such as the ACH network, allow payments to be automatically debited and credited between bank accounts. ACH stands for Automated Clearing House. 

Since it began operations in the early 1970s the ACH network has been an electronic funds transfer (EFT) network used by individuals, businesses, financial institutions and government organizations.  

The ACH network is a batch-oriented electronic funds transfer system governed by the NACHA Operating Rules which provide for interbank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities through which financial institutions transmit or receive ACH credits and ACH debits.

ACH Network and Financial Institutions

The ACH network functions from beginning to end through a series of implied or explicit agreements with all participating Depository Financial Institutions (DFI) which agree to comply with the NACHA Operating Rules.  Inherent to this agreement is the DFI's responsibility to assure that its customers follow procedures that complement the safety, soundness, and efficient functioning of the ACH Network.

Through the ACH Network, funds are electronically credited or debited to a company’s or individual’s deposit account.  These deposit accounts include checking, savings, loan and financial institution general ledger accounts.  Both funds and information may be exchanged between financial institutions on behalf of companies and individuals utilizing electronic payments, therefore providing better cash management capabilities. 

Every ACH transaction is traceable. It is probably the one system in the country where not a dime has been misplaced and not found.

ACH transactions are transmitted with the following information: the account holder name, financial institution routing and account numbers, party initiating the transaction and the amount and date of the transaction.  Additional payment information may be sent with an ACH payment by using extended record formats called addenda.  Addenda may include accounting related information such as an invoice number or a shipping advice.

For more information on ACH processing, contact