ACH or Automated Clearing House transfers are bank-to-bank transactions that incur little to no fees, making them the most reliable choice for individuals and businesses. You may have already transferred funds through this method at some point. Direct deposits, depositing money into your retirement account, or paying your bills electronically are some examples of ACH Transfers. You might wonder how they are different from bank transfers.

Well, transactions processed through the ACH network are comparatively cheaper or free than the transfers conducted through the bank. This makes ACH transfers the most suitable, efficient, and cost-effective choice among merchants who process online transactions on a regular basis. To make the best of these transfers, it’s important that you are aware of the limitations and penalties involved in ACH transactions. Let’s understand ACH transfer limits in detail.

What are ACH Transfers?

The days when people had to write the checks and wait for weeks for them to get cleared are long gone. You no longer need to write checks or pay the bills in person. With the payment infrastructure evolving at an exponential rate, we get to see new payment methods that offer ultimate convenience and charge little to zero fees. While debit/card transactions allow you to make payments quickly, there are better and more efficient options, like ACH transfers.

Imagine being able to make payments for your good, bills, and other services from the comfort of your home. That’s what Automated Clearing House offers. You can process Direct Deposits and Direct Payments through ACH from home conveniently. Let’s understand each type of transaction the network processes.

• Direct Deposit: The payment transferred from the government entity or a business to the customer fall into the direct deposit category. The employee paycheck, tax refund, or interest payment are all examples of direct deposit.
• Direct Payment: Transactions that involve sending payments to individuals, businesses, or other entities are categorized into Direct Payments. For instance, paying the utility bill online through your bank account is classified as Direct Payment.

ACH transfers have many benefits. Payments processed through the automated clearing house tend to be safer than other transaction methods. Besides, the transfers are usually quick. They reflect on the bank account the next day after it’s initiated. As mentioned earlier, the transfer is usually free. Your bank won’t charge you anything for moving your money from one bank account to another. Even if they do impose a fee, it will be nominal. At least, you won’t pay the $25-$75 for wire transfers processed internationally. Even worse, these transactions take several days to show up in the user’s bank account. So, you can have peace of mind knowing that ACH transfers are safe, quick, and reliable.

How Do These Transfers Work?

Your day-to-day transactions that are processed electronically pass through the ACH network only. PayPal is the best example. The money you pay to the retailer or a friend through PayPal is cleared through the automated clearing house only.

In these transactions, the companies or recipient can pull money from your bank account once you have granted them permission. For instance, subscribing to a video streaming service and setting up autopay for the same will give the company permission to take money from your account. The transfer takes place through ACH network.

Worried about how long does the transaction take? In most cases, the transaction is cleared within the same day. You just need to take care of the time to initiate the transaction and it will be settled fairly quickly. It might take time on holidays or when the bank suspects a fraudulent transaction.

ACH has not set a specific number of transaction that can be processed in a day. But, there is a monthly or daily limit for the amount you can sent or receive through this payment method. Fortunately, many restrictions have been removed in order to provide people with greater payment flexibility. Keep reading to learn more about the types of restrictions imposed by the federal government and NACHA. Other than these, the financial institutions involved in the payment processing may also impose certain limitations. This can vary from one bank to another.

ACH Transfer Limits: What Are They?

Some financial institutions impose transaction limits on payments processed through the ACH network. These are mostly per-day and per-month limitations. These limits might vary depending on the financial institution involves in the transfer, but some limitations imposed by the Federal Reserve are applicable to each transaction—incoming and outgoing. Here are the common types of ACH transfer limits discussed.

Incoming Transactions

NACHA, the institute that controls all ACH transfers, has imposed an incoming transaction limit for all ACH transactions. They have increased the transaction limit to $1 million for the same-day transaction and the rule is effective since March 18, 2022. This change in the maximum incoming transaction limit was made to ensure that the receiver gets the payment from larger transactions within the same day.

For instance, tax-based payments or payroll funding can be easily processed through the automated clearing house. Still, if you are expecting a sizable payment from another party, it’s advisable to check the transaction limit and schedule the payment accordingly.

Outgoing Transactions

The above-mentioned change in the ACH transfer limit also applies to outgoing transactions. The limit has been changed from $100,000 per transaction to $1 million, enabling people to make huge payments effortlessly.

NACHA’s president mentioned that this change in the transfer limit was imposed to allow people to seamlessly transfer money without facing any interruption due to the amount restriction. There’s no need to break down the payment into two or three parts.

Employers can transfer money through direct deposits and government entities can pay a tax refund of up to $1 million through the ACH network.

Savings Account

People were allowed to process only six transactions per month through the Automated Clearing House network earlier. The restriction was lifted in April 2020 and now any number of transactions could be processed, depending on your bank. Earlier, if you exceeded the six-transaction-per-month limit, you’d be liable to pay the penalty. The Federal Reserve removed this restriction, providing users with greater control over their money.

Common Penalties for ACH Transfers

Fortunately, the Federal Reserve and NACHA have made many changes in the limitations, making ACH transfers available for wider use. However, it’s important to be aware of certain penalties associated with these transactions.

Cutoff Times

The ACH transfers processed on the same day must be submitted by 4:45 PM Eastern Time. Even a small delay in the submission can result in a late payment. If you are processing the transaction on a Friday and you initiate it at 5:03, it will not be processed until the coming Monday.

Simply put, if you want the same-day transaction, it’s advisable to process it earlier in the day (preferably in the morning or at noon). This ensures that your payment is sent/received within the same day.

Insufficient Funds

Before you initiate the ACH transaction, check your account balance. If your account doesn’t have sufficient balance to cover the transfer, you will be charged a penalty fee. The penalty might vary depending on the bank you have an account with.

Note that some ACH transfers may not work internationally. Sending money from one bank account to another in an international country might not be possible through ACH transfers. You may need to consider a wire transfer for such payments.

Transaction Limitations at US Banks

As mentioned earlier, banks can put limitations regarding the number of transactions or the total amount you can process every day or a month through ACH network. The good news is that most businesses are willing to adjust these limits based on your banking history. Still, it’s advisable to learn the basic limitations of ACH transfers so that you don’t end up getting penalized for sending/receiving more money than what your bank allows. Below we’ve listed the ACH transfer limits for different banks in the US.

 

Bank Name	ACH Transfer Limit
Bank of America	$6,000 a month
TD Bank	$3,000 a month
Chase	$25,000/day, maximum transaction limit $10,000 per transaction
CitiBank	$10,000 a day
Capital One	$25,000 a month
U.S. Bank	Depends on your banking history, but the standard amount is $2,500 a day
Wells Fargo	$5000 a day
Ally Bank	The limit varies for each user

 

The best part about ACH transfers is that they are free in most cases, but some bank charge a fee, which may vary depending on the size of the transaction. It can be anywhere between $0 and $3 for US bank and $3 (standard) and $10 (next-day) delivery for the Bank of America.

Bottom Line

ACH transfer has become an integral part of online business. Transferring funds between bank accounts at zero fee is something that every individual or business would prefer. What makes it even better is the same-day delivery. However, knowing the limitations when transferring a huge sum of money to someone is crucial. You don’t want to incur penalty for exceeding the transaction limit.

 

ACH transactions are electronic payments that are processed through the ACH network. The ACH network is a nationwide system that processes electronic payments and transfers. ACH transactions can be used to pay bills, send money to friends and family, or make online purchases.

How do ACH transactions work?

When you make an ACH transaction, the payment is processed through the ACH network. The payment is then transferred to the recipient’s bank account. The time it takes for the payment to be processed and transferred depends on the bank’s processing time. Some banks process payments within one business day, while others may take up to three days.

Can I use ACH transactions to pay bills?

Yes, you can use ACH transactions to pay bills. In fact, many billers accept ACH payments. You can usually pay bills online or by phone.

Can I use ACH transactions to send money to friends and family?

Yes, you can use ACH transactions to send money to friends and family. You will need the recipient’s bank account information to make the payment. The time it takes for the money to be transferred to the recipient’s account depends on the bank’s processing time.

Can I use ACH transactions to make online purchases?

Yes, you can use ACH transactions to make online purchases. When you make a purchase, the payment is processed through the ACH network. The time it takes for the payment to be processed depends on the merchant’s processing time. Some merchants process payments within one business day, while others may take up to three days.

What are the benefits of using ACH transactions?

There are many benefits of using ACH transactions, including:

• Convenience: ACH transactions are easy to use and can be processed quickly.
• Security: ACH transactions are secure and use the latest technologies.
• Cost-effective: ACH transactions are cost-effective and can save you money on fees.
• Paperless: ACH transactions are paperless and help reduce clutter.
• Environmentally friendly: ACH transactions are environmentally friendly and help reduce paper waste.

What are the disadvantages of using ACH transactions?

There are some disadvantages of using ACH transactions, including:

• Security: ACH transactions are secure, but there is always a risk of fraud.
• Processing time: The time it takes for an ACH transaction to be processed can vary depending on the bank’s processing time.
• Fees: There may be fees associated with ACH transactions, depending on the bank and the type of transaction.

What are the different types of ACH transactions?

There are three types of ACH transactions:

• Direct deposit: Direct deposit is a type of ACH transaction that allows you to send money to someone’s bank account electronically.
• Direct payment: Direct payment is a type of ACH transaction that allows you to pay for goods and services electronically.
• ACH transfer: ACH transfer is a type of ACH transaction that allows you to transfer funds between bank accounts electronically.

How do I make an ACH transaction?

To make an ACH transaction, you will need the recipient’s bank account information. You can usually make ACH transactions online or by phone.

What is the difference between an ACH transaction and a wire transfer?

An ACH transaction is an electronic payment that is processed through the ACH network. A wire transfer is an electronic payment that is processed through the SWIFT network. Wire transfers are typically used for international payments.

ACH transaction fees, or Automated Clearing House fees, are the charges assessed to merchants for the processing of electronic payments. The amount of these fees can vary based on a number of factors, including the size and type of business, the volume of transactions processed each month, and whether the payment is domestic or international.

Despite their ubiquity, many merchants are unaware of the impact that ACH transaction fees can have on their business. That’s because these costs are often hidden or bundled into other services, like merchant accounts and payment gateways.

How ACH Transaction Fees Affect SMBs?

ACH transaction fees increase with each step in an electronic payment process. They begin when a customer authorizes the transaction, continue when banks transfer the payment to and from the merchant’s account, and end with funds in an electronic holding pool before they are deposited into a business’ bank account.

For businesses that process few transactions each month, ACH fees can be minimal. For companies that regularly move six or seven figures through ACH payments, however, these fees can start to add up.

ACH Fees by Payment Type

One of the most challenging aspects of ACH transaction fees is that they vary widely based on payment type. While businesses can quickly see an ACH fee for a debit card payment, there are several different fees merchants may need to consider when processing other forms of ACH payments.

ACH processing fees can be broken down into two major categories, depending on the payment type: one-time transactions and recurring transactions. Below are some of the most common ACH transaction fee types that merchants will encounter when accepting electronic payments.

Other Transaction Fees for Businesses

In addition to standard ACH fees, businesses can incur other charges for particular types of ACH payment processing. These fees are often assessed by the bank or third-party service provider that manages a company’s business account.

ACH Check Processing Fees

One of the most expensive ACH fees for businesses is for check processing via Automated Clearing House (ACH). Unlike traditional check processing, which involves a single check being deposited into a business’ account, ACH check processing is the electronic conversion of a paper check.

ACH Check Processing Example:

Customer writes a $200 paper check to merchant Joe’s Electronics. Joe’s Electronics enrolls in an ACH Check Conversion Service through their bank. The bank converts this $200 check into an ACH debit payment and sends the payment information to the merchant’s payment gateway. Joe’s Electronics pays a $5 fee for this service.

In this example, the business would pay:

• ACH Transaction Fee: $5
• Gateway Fee: $0.50
• Bank Service Fee: $0.50
• Check Conversion Fee: $3.00

For this customer, the total ACH check fee would be $9.00. If Joe’s Electronics had five of these payments every month, their annual ACH check processing fees could reach almost $460!

ACH Debit and Credit Transaction Fees

ACH debit and credit transactions are the most common type of ACH payment. These transactions occur when a customer provides their bank account number and routing number to the merchant in order to make a purchase.

In order for a business to accept an ACH debit or credit, they need to have an agreement with a third-party provider, like NACHA. This company will direct the payment from the customer’s bank account to the merchant’s account.

ACH Debit and Credit Transaction Fee Example:

Customers buy a new laptop from Joe’s Electronics using their debit card. Joe’s Electronics has an agreement with their bank and NACHA to process ACH debit transactions. The bank receives the payment information from NACHA and sets up the merchant account with a $0.25 ACH debit transaction fee.