The Automated Clearing House, commonly called ACH, is a network of financial institutions that carry out 98% of the electronic transactions in the United States. A clearing house acts as a middle man during a transaction between two parties, such as a customer and a merchant, or an employer's payroll system and an employee.

Who Runs It?

The ACH system is watched over by NACHA-The Electronic Payments Association. The NACHA part of their name stands for National Automated Clearing House Association, which was the organization's former name. This non-profit organization of banks and industry councils regulate the protocols used by financial institutions to move money around electronically using ACH and other methods.

What types of transactions use the ACH network?

All sorts of electronic transactions use the ACH network, including payroll deposits, debit card purchases, ATM withdrawals, online bill payments, online purchases, and more. In fact, 98% of the United States electronic transactions use the ACH network.

What are the parts of an ACH transaction?

The party initiating the transaction is called the originator. For example, a merchant accepting a debit card or an employer making a payroll deposit would both be originators.

The originator's request is sent to the receiver. For example, a customer making a purchase or an employee getting a payroll deposit would both be receivers.

With the receiver's authorization, the originator's financial institution (called an ODFI) sends a request to the receiver's financial institution (called an RDFI) with instructions on how much money to transfer, and where to transfer it to or from.

Are there any privacy conerns?

Some financial institutions will sell ACH history to marketing companies. Additionally, ACH history has been used to track fugitives and other people of interest.