To make sure you don't forget to pay your electric bill, you can authorize the electric company to automatically deduct the amount you owe each month from your bank account. Because the electric company initiates the money transfer, your bank statement shows the transaction as an electronic transfer that deducted money from your account, also known as an ACH debit.
Automated Clearing House
Electronic deposits, payments and transfers are processed through a network of financial institutions called the Automated Clearing House, or ACH. When a company or government agency initiates a transaction to deposit or withdraw money from your bank account, your bank statement contains a transaction labeled "ACH" to indicate that it was an electronic transaction processed through the Automated Clearing House.
Debits and Credits
In accounting terminology, when you add money to your account, that's a credit to your account. When you deduct money from your account, it's called a debit. An ACH debit means that a transaction was an electronic deduction of money from your account that a company or government agency initiated. The transaction detail usually indicates who received the payment.
- AndreyPopov/iStock/Getty Images