Most Americans receive an ACH credit two or three times a month without knowing they’ve done so. The ACH system is a great unsung part of America’s financial plumbing, and even frequent commercial ACH users can fall behind the pace of new solutions being built atop the underlying infrastructure. Despite not being a household name, ACH credit payments are quietly ubiquitous. Often referred to by informal names matching popular use cases (e.g., “direct deposit” and “peer-to-peer payment”), the ACH network powers tens of millions of credit transactions every day.
Impactful ACH credit usage statistics include:
  • 11.6 billion ACH credit transactions per year
  • $30.2 trillion in total value exchanged
  • 35 ACH credit transactions per person in the US
  • ~94% of Americans paid wages/salary by ACH credit
  • 11,000+ banks and credit unions in the US can receive ACH credit
Source: Nacha

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What are ACH credit payments?

An Automated Clearing House (ACH) credit payment occurs whenever someone instructs the ACH network to “push” money from their account to someone else’s. In the Straddle API, ACH credits are processed as payouts. This could be an employer (often via some processing partner) pushing payroll (direct deposit) to their employees, or a government agency pushing cash payments to eligible citizens. It could also be a consumer digitally paying a bill, buying something online, or initiating a peer-to-peer transfer to a friend through a service like Venmo or CashApp.
ACH credits essentially move money from one bank account to another easily and inexpensively—from as fast as a few hours to as long as a few business days—all with just a name, bank account number, routing number, and basic transaction details.

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How do ACH credits work?

For the person sending funds, an ACH credit transaction is the digital version of a paper check. Instead of filling out a piece of paper for the payee to bring to their bank, the payer instructs the ACH network to move money between their accounts directly. Here is how ACH credits work mechanically:
1

Transaction initiation

The payer or their processing partner gives an Originating Depository Financial Institution (ODFI) the payee’s account information, the amount to be sent, a categorization code, and a target settlement date.
2

Batch processing

The ODFI or an approved processing partner passes on these requests to the ACH network in periodic batches.
3

Network distribution

Five times each business day, the ACH network breaks down these incoming bundles into individual messages (transactions) and rebundles them into new batches for immediate delivery to each Receiving Depository Financial Institution (RDFI) that holds payee accounts.
4

Transaction execution

Each RDFI then imports their incoming batches into their system, executes all the transactions they can based on the processing window requested, and sends back any error codes with their next regular batch.
5

Settlement

If no error/return code is received by the requested settlement time, the ODFI and RDFI settle the transaction using their balances at the Federal Reserve.
6

Fund release

Funds for settled transactions are then released by the RDFI to the payee.
Depending on when the first messages are sent and/or whether the ODFI pays the extra fee for same-day processing, it generally takes two business days for credits to reach payees.