With more and more bills being paid by digital means, it's important to understand each transaction on your monthly savings or checking account bank statement. Reviewing your bank statement is necessary if you want to carefully track your finances.
There may be entries that you don't understand or don't remember. Sometimes you'll see a code that includes "ACH" as an entry to a purchase you made. This charge indicates the process used to make payment by you without using a check or card.
Definition of ACH
The Automated Clearing House is a payment system that connects banks and allows you to use your savings or checking account to pay and receive funds. It processes electronic fund transfers (EFTs) made in the U.S. through customer account and bank routing numbers. Making use of this system saves consumers and banks time and money in the payment and receipt of funds. It also helps products move faster due to the ease of having money deposited in your account and being able to pay for an item instantaneously.
Read More: What Is the ABA Number?
Purpose of These Transactions
ACH is used to make payments online or over the phone and to receive personal or business funds. Like an electronic check, you must give the company your bank information and permission to debit from, or deposit into, your account. The advantage is that you can make purchases and pay bills without using a debit or credit card.
ACH charges can be helpful to your credit score because you can set up auto payments, processed this way to help you make sure your payments arrive on on time. You also may receive electronic payments from your employer or other organizations and not be burdened with having to visit a bank and cash a check.
How It Works
The company to whom you are sending payment must submit it to ACH. The bank receives the request for a withdrawal and debits the funds from your account. They are sent to the financial institution that deposits the money into the account of the originating requester.
The ACH system functions during banking business hours only. Therefore, if a purchase is approved outside of those times, such as on a weekend or holiday, ACH cannot make accurate confirmation of funds. So, it may take several days before the company being paid is notified that payment was not successful.
Read More: What Is ACH?
ACH on Your Bank Statement
Upon receiving your bank statement, your charges through the ACH system may say "ACH Debit" next to the withdrawn funds, and the date may be after the time you made your purchase. This indicates that you approved a one-time or repeating automatic payment from your account.
If you find that you did not authorize this charge, call your bank and ask that the charge be investigated. If you approved a repeating debit of this kind in the past, then you do not have to authorize the withdrawal each time.
Carol Deeb has been an editor and writer since 1988. Her work has appeared in magazines, newspapers and online publications, as well as a book on education. Deeb is a real-estate investor and business owner with professional experience in human resources. She holds a Bachelor of Arts in English from San Diego State University.