ATM transactions allow you to access your bank account funds from anywhere in the world. For example, Venmo payments allow you to easily pay back friends without worrying about having the right amount of cash. There are additional specific benefits for individual types of EFTs, which vary based on the product. Plus, they’re safer: you never have to worry about your funds being physically lost or stolen. Whether it’s paying for an online purchase using your credit card, or getting your biweekly paycheck directly deposited, EFTs eliminate the hassles of cash and checks. The main benefits of using EFT payments are convenience and security. This includes all online bill payments and purchases, direct deposit, ATM withdrawals, credit and debit cards, eWallet payments, and payments through apps like Venmo. If you initiate and/or approve of the transaction using technology, it’s an EFT. EFT is an umbrella term, and EFTs are any transfers of money that are authorized electronically-i.e., not initiated in person, manually, like withdrawals at the bank counter. Keep reading to learn more!įirst, let’s start with EFT, which stands for Electronic Fund Transfer. In this post we’ll define each term, discuss how to make an ACH payment, and when using ACH transactions-over other forms of EFT payments-makes the most sense. Knowing what sets apart ACH banking from other forms of electronic payment is important, especially for small businesses who not only need to send many payments each month, but also receive them. But when it comes to business banking, it’s important to know the difference between certain products and services, as choosing the right tool for the right transaction can not only save you money, but can also save you time spent accounting and managing your business finances.ĮFT (Electronic Funds Transfer) and ACH (Automated Clearing House) payments are two of the most commonly conflated financial terms. → Ready to secure your ACH process? Plaid Signal reduces ACH return risk and optimizes payment flows for more secure ACH processing.With so many acronyms in the banking industry, keeping them all straight can be a tedious process. However, there’s not always a guarantee that the funds in question will still be there (as funds may have already been made available to the recipient to spend or withdraw), so the payment may not be returned in all cases. In most cases, the Originating Depository Financial Institution (ODFI) has up to five business days from the settlement date to deliver a refund request. The payment was sent to the wrong account The National Automated Clearing House Association (Nacha), the main governing body over the ACH system, allows the sender to request reversal of credit transactions in four situations: While all ACH credit transfers are meant to be definitive, occasionally mistakes may lead to funds being returned. What’s an ACH credit refund (aka ACH return)? → Looking to streamline payments for both ACH and RTP? Plaid Transfer authorizes customers, analyzes risk, and moves money with one single integration. If no error/ ACH return code is received by the requested settlement time, the ODFI and RDFI settle the transaction using their balances at the Federal Reserve.įunds for settled transactions are then released by the RDFI to the payee.ĭepending on when the first messages are sent and/or whether the sender pays the extra fee for same-day processing, it generally takes two business days for credits to reach payees.įor more on timelines, see our in-depth guide on how an ACH transfer works. Six 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.Įach RDFI then imports 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. The ODFI (typically a bank), or an approved processing partner, passes on these requests to the ACH network in periodic batches. 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. Here is how ACH credits work mechanically: 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. For the person sending funds, an ACH credit transaction is the digital version of a paper check.
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