In the payments world there are a lot of acronyms that can get a bit confusing sometimes. You’ve probably heard the term ACH, but do you know what ACH stands for?

ACH stands for the Automated Clearing House, a form of payment processing operated by the ACH network across the US. This payment method is used by businesses to collect money directly from their customers through electronic bank-to-bank transfers. ACH is also sometimes referred to as direct debits, EFTs, or Pre-Authorized Debits (PADs.) It’s a practical, automated and inexpensive way to get paid.

ACH payments enable a business to collect one-time or recurring fees from their customers.

Businesses can pull funds directly from their customer’s bank account and deposit the payments with ease. The low fees associated with ACH means a business could potentially save thousands of dollars over credit card processing fees. The Automated Clearing House is federally secured by the National Automated Clearing House Association (NACHA), which makes ACH safe, trackable, and reversible.

The customer must give permission before a business can withdraw funds from their customer’s bank account. This is called an authorization agreement – a written agreement (electronic or paper) between a business and their customer. The agreement allows the business to withdraw money from their customer’s bank account according to the terms outlined. 

Because ACH payments can be scheduled ahead of time there is never a worry about a customer making a late payment. Another advantage of ACH is that it is electronic, so it can’t be misplaced or stolen like checks.

Businesses use ACH payments to collect ongoing membership and service fees, rent, tuition, as well as one off and sporadic payments. If you’re looking for a place to start using ACH payments, try Rotessa and sign up for your free account today.