What Is ACH Direct Deposit?

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Gone are the days of rushing to your bank, credit union or other preferred financial institution before the closing of business on Fridays to make sure you can deposit or cash your paper check. Now, instead of waiting more than just a few business days to move money, send money or receive money, it can all be electronically transferred instantaneously. So what are these magical wire transfers, and how do they work?

ACH Direct Deposit Quick Take 

Automated Clearing House, or ACH network, payments are electronic fund transfers deposited directly into your checking or savings bank account, generally by your employer or a federal or state agency. Some of the most common types of ACH payment systems, such as ACH transfers, ACH debits, ACH processing or other types of ACH transactions include:

  • Salary payments 
  • Tax payments
  • Automated bill payments
  • Government benefits
  • Mortgage payments
  • Money transfers
  • Car loan payments

ACH Direct Deposits: Pros and Cons

Though there are many benefits for businesses when using any ACH payment system, such as low costs for a high volume of transactions as well as a convenient and efficient way to manage bulk payments, the benefits for individuals are also numerous.

No payment system is perfect, though, so here is a look at some pros and cons for you when you’re considering switching to ACH direct deposits.

Pros of ACH Deposits

  • Safer than a regular wire transfer and has the option to reverse payments
  • Usually free transfers for sending or receiving money
  • Good way to pay bills on time
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Cons of ACH Deposits

  • Need to have either a checking or savings account set up
  • Limit of six transactions per month if using a savings account
  • Cut-off times for same-day transactions can extend how long it will take for you to receive funds

How ACH Deposits Work

Say goodbye to all that paper, because now your money is digitized. ACH direct deposit has made life more convenient, so it is good to know how it works. For example, one common type of ACH direct deposit is payroll or salary payments. Here is a sample look at what the process would look like if you opted for direct deposit for your paycheck:

  1. Your employer would request their bank make payments to your bank account either weekly, biweekly or monthly, depending on the company’s payroll schedule.
  2. There is a bank-to-bank transfer through the ACH network, where your salary is sent as an electronic fund transfer.
  3. Your bank receives the funds and then directly deposits your paycheck into your bank account.

How Long Does an ACH Deposit Take?

Generally, ACH deposits and transfers are processed in batches. This means it typically takes one to three business days to fully deposit into your account or clear from your account, depending on whether or not you are receiving or sending money.

You may see the transaction immediately marked as “pending” but this means it hasn’t officially been cleared yet.

Final Take To GO 

ACH direct deposits have changed the landscape of how people, employers and government agencies send and receive money. A majority of the workforce now gets their paycheck via direct deposit, allowing them to get funds faster and not have to deal with banking hours of operation or physical checks.

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Setting up an ACH payment system only requires you to have a bank account so that you can supply your account number and the bank’s routing number.


Here are the answers to frequently asked questions about ACH direct deposits.
  • What does ACH mean on a deposit?
    • ACH stands for automated clearing house, and it refers to direct deposits or electronic fund transfers being made through banks or credit unions.
  • Is ACH deposit a direct deposit?
    • Yes, an ACH deposit is an electronically transferred fund that is directly deposited into your checking or savings account. Examples of ACH direct deposits include salary payments from your employer, tax refund payments from the Federal Reserve or government benefits.
  • What is the difference between direct deposit and ACH?
    • The difference between direct deposit and ACH transfers is that direct deposits are transfers into your checking or savings account in the form of tax payments, government benefits or payroll, whereas ACH transfers are processed through the Automated Clearing House Network and are more bank-to-bank fund transfers.
  • How long does an ACH deposit take?
    • ACH deposits, on average, take one to three business days to fully appear in the receiving checking or savings account.

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About the Author

Caitlyn Moorhead has written content for a variety of businesses and publications. After graduating from Central Michigan University cum laude, she moved to New York City where she wrote columns, articles and plays for several years before relocating to Austin, Texas in the fall of 2020.
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