Moving money with ACH

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Have you ever heard of ACH transfers? If not, you’re in good company — the term is a pretty unintuitive bit of banking jargon. At Azlo, we believe ACH transfers are a great tool for entrepreneurs, so we’re here to help you learn about them and then put them to use.

The ACH (which stands for Automated Clearinghouse) network is one of the biggest payment networks in the U.S. In 2017, it processed 21.5 billion transactions valued at more than $46.8 trillion. That’s approximately 66 transactions and over $140,000 for every person living in the U.S.

With so much money moving through this network, every entrepreneur can benefit from knowing about it and using it. Here’s a crash course in how ACH transfers work, and how they can work for you.

How they work

If you’ve ever received a direct deposit or paid a bill by entering your account and routing number, you’ve used ACH transfers. ACH transfers can be used to “push” money from one account to another (like a direct deposit, where the employer pushes money into the employee’s account) or to “pull” money (like when the electric company debits a payment).

Here’s how the money moves from one account to the other.

  1. A bank or transfer services initiates the transfer (on behalf of a person or a business) and digitally send sends it to the central clearinghouse.
  2. At the clearinghouse, the transfer will be sorted and sent to another bank, called the receiving bank.
  3. The receiving bank will process the transfer and either credit or debit the proper account. If the transfer is to “push” funds, the process is complete.
  4. If the transfer is to “pull” funds, however, the funds have to move back through the central clearinghouse before they arrive in the other account. This last step adds an extra business day or two to the transfer timeline.
  5. Since there are several steps involved in each transfer and each step happens in timed batches, the entire process can take a couple of business days. (Though same-day and next-day ACH are being developed now and expected to be widely used by next year.)

Why ACH is great for entrepreneurs

Although they take some time, ACH transfers have tons of advantages: they’re secure, they’re convenient to send, and they’re very efficient — meaning that many banks and other services (including Azlo) offer ACH transfers fee-free.

Because of these advantages, many businesses rely on ACH transfers. Credit cards are a great, convenient option for smaller payments, but the costs eat into your margins and they add up fast for large payments.

For example, PayPal charges 2.9% of the transaction total plus a $0.30 fee for every online card transaction they process. If your customer or client makes a credit card payment for $150, that will cost you $4.65. If, on the other hand, you ask them to send you a payment digitally via ACH transfer, your fees will be much lower or free.

ACH transfers are also a convenient way to pay suppliers, employees, or contractors; or transfer money from one of your accounts to another.

ACH at Azlo

With an Azlo account, you can use send payments via ACH to anyone, as long as you have their account and routing number. You can also transfer funds between Azlo and any other bank account you own. And, of course, all these transfers are entirely fee-free.

We’re planning to expand and improve these options even further. Right now, we’re working to speed up these transfers. We’ll keep you updated as these product features roll out, and we’ll keep working hard to help you make the most of this core clearing network.



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