What Is an ACH Transfer? How It Works

Key takeaways

• ACH stands for Automated Clearing House—a U.S. network used for processing electronic bank-to-bank transfers.

• It’s commonly used for direct deposits, bill payments, online purchases, and recurring transfers.

• Xe provides faster, more transparent alternatives when sending money abroad

Ever noticed your paycheck showing up automatically in your bank account on payday? Or a utility bill getting paid without you lifting a finger? That’s ACH in action. The ACH network is one of the foundational systems powering modern U.S. banking, handling everything from salary deposits to rent payments.  

While millions of Americans rely on it every day, few people understand what ACH actually is or how it works behind the scenes. In this blog, we’ll break down exactly what ACH means, how it works, when to use it, and how it compares to other methods like wire transfers or international payments. 

We’ll also explain why you’ll need a different approach when sending money across borders—and how Xe makes that process simpler.

What is ACH?

ACH stands for Automated Clearing House—an electronic payment system used throughout the United States to move money between bank accounts. Managed by NACHA (National Automated Clearing House Association), ACH has been operating securely since the 1970s¹.

Rather than processing individual payments one at a time, ACH handles transactions in batches, which helps keep costs low for banks, businesses, and consumers.

ACH transfers work in two ways:

• ACH Credit: The sender pushes money to the recipient (ex. an employer paying wages)

• ACH Debit: The recipient pulls money from the sender (ex. a utility company charging your account monthly)

These two transaction types enable a wide range of personal and business banking needs across the United States.

How do ACH transfers work?

Understanding the ACH process helps explain why these transfers take longer than other payment methods but cost less:

1. Transfer initiated: An individual or business submits a payment request through their bank or financial institution

2. Batch processing: Payments are grouped together and sent to the ACH operator (Federal Reserve or The Clearing House²)

3. Receiving bank processes the payment: Funds are routed to the recipient's bank account, usually within 1-3 business days, however same day transfers are available

This batch processing system keeps costs down, but means standard ACH transfers aren't instant like some other payment methods.

Common uses for ACH transfers

ACH powers many everyday financial transactions you likely use regularly:

Direct deposit

Employers use ACH to deposit salaries, bonuses, and reimbursements directly into employee bank accounts—no physical checks required.

Government payments

Social Security benefits, unemployment assistance, and tax refunds are typically distributed via ACH transfers.

Bill payments

Utility companies, credit card issuers, insurance providers, and subscription services rely on ACH to collect automatic payments from customers.

Recurring transfers

Monthly expenses like rent, mortgage payments, and charitable donations are often set up as recurring ACH transactions.

Moving money between accounts

Many people use ACH to transfer funds between their own accounts at different U.S. banks.

Business-to-business payments

Companies frequently use ACH for paying vendors, settling invoices, and managing payroll operations.

ACH vs. wire transfers

While both methods move money between banks, they serve different purposes:

When to choose each: Use ACH for routine, domestic payments where speed isn't critical. Choose wire transfers for time-sensitive or international transactions.

Is ACH safe and reliable?

ACH is highly secure and reliable—over 31.5 billion ACH payments were processed in the U.S. in 2023 alone³. The system is regulated by both NACHA and federal agencies, with banks using encryption, firewalls, and multi-factor authentication to protect transfers.

Unlike wire transfers, ACH payments are often reversible in cases of:

• Duplicate transactions

• Incorrect payment amounts

• Fraudulent activity

However, because ACH doesn't offer real-time processing, it's not ideal when immediate payment confirmation is essential.

ACH and international transfers

Here's where ACH shows its limitations: ACH only works for domestic transfers within the United States.

If you need to send money overseas—whether supporting family abroad, paying international suppliers, or making property purchases—you'll need:

• SWIFT/BIC codes to identify international banks

• IBAN numbers for many countries

• A service that can handle currency conversion

• Understanding of international banking regulations

Simplifying international transfers with Xe

While ACH handles domestic U.S. transfers efficiently, international money transfers through traditional banks can be complex and expensive. Xe specializes in making cross-border payments simple:

• Transparent fees: Know exactly what you're paying upfront

• Competitive exchange rates: Get more value compared to traditional banks

• Faster delivery: Many transfers complete within 24 hours

• Simple online process: No need to navigate complex international banking codes

• Global reach: Send money to over 190 countries in more than 130 currencies

Frequently asked questions (FAQs)

Have questions about how ACH works or when to use it? Here are answers to the most common inquiries:

1. Is ACH the same as a bank transfer?

ACH is one type of bank transfer, but not the only kind. Wire transfers and internal bank transfers also fall under the broader category of bank transfers.

2. Can I use ACH to send money internationally?

No. ACH only works for U.S. domestic transfers. For international transfers, use specialized services like Xe that handle currency conversion and international banking requirements.

3. Is ACH transfer free?

Many banks offer ACH transfers for free, especially for personal use. Some businesses or expedited services may charge a small fee.

4. How long does an ACH transfer take?

Typically 1–3 business days. Some banks offer same-day ACH, though cutoff times may apply.

5. Can I cancel an ACH payment?

In some cases, yes—especially for scheduled future payments or recurring transfers. Contact your bank immediately to request a payment stop.

6. What's the difference between ACH credit and ACH debit?

• ACH credit: The payer pushes money to the recipient (like direct deposit)

• ACH debit: The recipient pulls money from the payer (like automatic bill payment)

Xe is here when you need to send money internationally

ACH is a great tool for everyday transfers in the U.S., but it falls short when you need to send money internationally. That’s where Xe comes in. We offer fast, secure, and cost-effective global money transfers—no need to worry about the limitations of domestic systems. Simply create a free account, compare rates, and send money worldwide—all from your computer or mobile device. 

Start comparing rates or sign up to send your first international transfer with Xe.

Citations

¹ ACH Definition - Nacha - 2025 

² ACH Operator - Federal Reserve - 2024

³ Payments Processed by ACH - Nacha - 2024

**The information from these sources were taken on June 4, 2025. 

The content within this blog post is not intended for use as financial advice. This content is for informational purposes only.