Automated Clearinghouse (ACH)

Electronic payments of all kinds are used frequently as a safe, reliable and convenient way to make and receive payments. The ACH network is a highly reliable and efficient nationwide electronic funds transfer system governed by the NACHA operating rules that provide for the inter-bank clearing of electronic payments for more than 12,000 participating depository financial institutions. The ACH network is used to process high volumes of relatively small-dollar payments for settlement within one to two business days. In calendar 2000, more than 6 billion ACH payments were made.

ACH transactions are settled in a similar way to checks. The clearinghouse takes all the ACH files received daily from member banks. It sorts them based on where they originated and where they are to be deposited. The ACH totals the transfers, and credits or deducts the banks accounts accordingly.