What Is an ACH Withdrawal? How Do ACH Withdrawals Work? (2022)

There are many ways to settle debt. If you drive your uncle to the airport, for example, he might buy you a sandwich in return—or he might instruct you to go into his refrigerator and help yourself to some particular sandwich. You produce the sandwich yourself, but only because the owner of the sandwich has authorized the transfer (and told you where to find the item).

In an Automated Clearing House (ACH) withdrawal, the debtor withdraws funds from the account of the payer, who has authorized the transfer of funds—just as you might debit your uncle’s cache of sandwiches in return for taking him to the airport. ACH withdrawals are an efficient, cost-effective and secure method of transferring funds. Businesses use it to receive payments from customers and to manage recurring payments to vendors.

What is an Automated Clearing House (ACH) withdrawal?

ACH withdrawals are a method of transferring funds through the Automated Clearing House network, an electronic network that acts as an intermediary between financial institutions. An ACH withdrawal withdraws money from one bank account to another.

In any ACH transaction, the originating party’s financial institution is known as the originating depository financial institution (ODFI), and the other party’s financial institution is known as the receiving depository financial institution (RDFI). Note that the RDFI is the institution that receives the transaction request, not necessarily the institution that receives the funds: in an ACH withdrawal, the ODFI requests and withdraws money from the RDFI account into the ODFI account, which results in a debit from the RDFI account and a credit to the ODFI account.

To initiate an ACH withdrawal, an individual or merchant needs access to their own banking information (including routing number and account number), account number and routing number of the paying party, record of payment terms, authorization to make the withdrawal, and access to the bank or ACH provider.

How does an ACH withdrawal work?

1. ACH withdrawal is requested and initiated.
2. The request is sent to the bank.
3. The request is sent to ACH.
4. ACH processes withdrawal requests.
5. Production is made.

Here is an overview of ACH withdrawal transactions between businesses and customers.

1. ACH withdrawal is requested and initiated. Customers purchase goods or services and choose to pay via ACH transfer, submitting their routing number and account number either directly to the merchant or the merchant’s third-party payment processor.
2. The request is sent to the bank. The merchant or third-party payment processor sends an ACH withdrawal request to the merchant’s financial institution along with the customer’s banking information.
3. The request is sent to ACH. The merchant bank (ODFI) processes the transaction along with other ACH transfers. These batch transactions are sent periodically on business days.
4. ACH processes withdrawals. ACH operators receive batch transactions, organize them and submit the transactions to the customer’s bank (RDFI).
5. Production is made. RDFI processes the transaction and credits the payment amount to the merchant’s account at ODFI.

ACH withdrawal versus ACH credit

All ACH transactions are classified as either debit transactions or credit transactions. An ACH withdrawal (also known as an ACH debit transaction) transfers money from an account at the receiving depository financial institution (RDFI) into an account at the originating depository financial institution (ODFI). ACH withdrawals include automatic payments, such as recurring bill payments and customer payments for goods or services.

An ACH credit transaction (also known as an ACH deposit) transfers money from an account at ODFI to an account at RDFI. This includes direct deposit of wages, government benefits and tax refunds. Both types of transactions use the ACH network as an intermediary between financial institutions.

Advantages of ACH withdrawals

ACH withdrawals are a secure and cost-effective way to receive payments from customers, with fees typically lower than other forms of payment (such as credit cards). They also require less manpower to process than paper checks, reducing your administrative burden and freeing you up to focus on developing and growing your business.

cost

ACH withdrawal fees are generally lower than credit card transaction fees and wire transfer fees. Contact your bank (or third-party payment processor) to find out how much to charge for an ACH withdrawal. Many businesses also use ACH withdrawals for bill payments, which are usually free.

Safety

ACH payments offer security advantages over paper checks and cash. Checks can get lost in the mail and, because they contain your routing and account number, are a liability if intercepted. Large amounts of cash also pose a higher risk because they are easily lost or stolen, meaning transporting cash requires advanced security messages to prevent theft. ACH withdrawals also provide security advantages over wire transfers, as the one- to three-day processing time provides a buffer in which businesses can stop payments if fraud is suspected or an error is identified.

Comfort

Many businesses use ACH withdrawals to provide recurring payments for utilities or other ongoing operating expenses, reducing their administrative burden and ensuring bills are paid on time. You can also use ACH withdrawals to receive payments from customers, which is faster and more efficient than receiving and depositing paper checks.

ACH withdrawal FAQ

What is an ACH payment?

An ACH payment is a method of transferring funds from one bank account to another bank account located on the Automated Clearing House network—an electronic system for transferring money without using paper checks or cash.

How long does an ACH withdrawal take?

ACH withdrawals usually take one to three business days to process, but some financial institutions offer same-day ACH transfers for an additional fee.

Are ACH payments secure?

Yes, ACH payments are a secure way to transfer money and keep your banking information confidential.

What do you need for an ACH payment?

Submitting an ACH payment requires you or your third-party payment provider to collect the following information from the customer: Bank account number Routing number Whether the account is a savings or checking account Authorization to debit the payment amount Acknowledgment of payment terms

source: https://www.shopify.co.id/blog/ach-withdrawal