Everything you need to know about ACH money transfers

Canada By Mitchell Steiman May 27, 2021

Individuals and businesses alike need easy ways to send and receive money, and one of the most popular ways to do so is with an ACH money transfer. Quick, simple, and reliable, ACH money transfer can make all the difference when you need to pay bills, make a purchase, or send money to friends and family.

No matter what your reason for sending funds, learn what an ACH money transfer is, when to use it, and which type is right for your needs, here.

What is an ACH money transfer?

An ACH money transfer is the electronic movement of funds through an automatic clearing house. The Automated Clearing House Network processes transactions in batches, three times a day, so there is less wait time between sending and receiving the money than other methods of money transfer.

ACH money transfers eliminate any paper trail that might accompany a bank transfer or other payment method. This factor may not be relevant for your purposes, but it is important to note if you’re considering ACH for payroll.

Types of ACH money transfers

There are two major kinds of automatic clearing house payments. You can choose to make debit or credit transfers. The process for both types is essentially the same, but they differ in cost and speed. Here’s what you need to know:

Debit ACH transactions

Debit ACH transactions are those which are taken out of your account. If you have automatic payments set up for any of your monthly bills, you have a debit ACH money transfer set up.

Credit ACH transactions

A credit ACH money transfer takes longer to process and typically comes with a fee associated. These payments occur when money is transferred between bank accounts, usually of friends and family members. Rather than clearing on the same day, credit ACH can take up to one or two business days. Most companies will either charge a percentage fee or a flat rate for processing credit ACH transactions, but it is still a cost-effective and fast option if you need to send money digitally.

While anyone can make either a debit or a credit ACH money transfer, it is important to know the difference, so you make the right choice. If you need to avoid extra fees or send money faster, it’s helpful to know your options.

What’s needed for an ACH money transfer?

Making an ACH money transfer is easy if you have the right information. To make an ACH money transfer, you’ll need to provide the following details:

  • Name
  • Routing/ABA number
  • Account number
  • Bank account type (business or personal)
  • Transaction amount

If you have cheques associated with the account you’re sending money from, you’ll find the routing/ABA number plus the account number listed on one of your cheques. Otherwise, you should be able to find them through your bank’s app.

When you’re ready to make the transfer, you can use an international money transfer service like Western Union to process your transaction.

What’s the difference between ACH money transfers, wire transfers, and direct deposit?

It’s important to know when and why you should make an ACH money transfer. With so many options for transferring money, why choose ACH over a wire transfer or direct deposit, for example?

In terms of speed, both ACH money transfers and wire transfers are quick options for sending money electronically. The main differences between an ACH and a wire transfer are safety and cost. ACH money transfers can be reversed by the sender while wire transfers cannot. ACH money transfers aren’t frequently reversed, but in certain instances, such as overpaying, the option is available.

Another key difference is in additional fees. ACH money transfers are often free for the sender but can require a fee for the receiver. Wire transfers, on the other hand, almost always require a fee. You can expect a flat-rate fee for each wire transfer, with international bank transfers being more expensive.

If you’re looking for a cost-effective option, an ACH is typically quick, convenient, and with minimal fees.

The differences between ACH money transfers and direct deposits are more subtle. In fact, people often confuse them. The most important thing to remember is direct deposits are electronic payments processed through a third party, requested by the receiver.

ACH money transfers can go both to and from your account. Direct deposits only cover one-way payments.

Pros and cons and ACH money transfers

The truth is there are a variety of electronic payment options for you to explore. Some will make sense for your needs and others simply won’t work. If you’re still unclear whether ACH money transfers are right for you, consider these pros and cons.

The biggest advantages of ACH money transfers include ease of use, convenience, and lower fees. Compared to other electronic payment methods, ACH tends to be the most affordable.

On the downside, there are limits to how much money you can send via ACH money transfer each month. Luckily, most people don’t have an issue with this, but businesses (especially mid-to-large-sized companies) can run into problems with transfer limits.

ACH money transfers are more prone to logistical issues too. If payments aren’t initiated before the cutoff time, you’ll have to wait until the next business day to process your transfer. International businesses should pay particularly close attention to these time limitations.

Other obstacles include overdraft fees for insufficient funds, restricted payment options to different countries, and limits on savings account transfers.

For some, these cons won’t have a significant impact. For everyone else, there are other options available to you. Money transfer services offered through a company like Western Union can provide quick, convenient ways to transfer money.

What are my alternatives to ACH money transfers?

No matter what your reason for sending money is, it’s important to know your options. With convenient ways to send money online, with our money transfer app, or from hundreds of thousands of agent locations worldwide, we make money transfer simple.

Learn how to start transferring money from Canada in five simple steps. And for more information about using Western Union, view our frequently asked questions.

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