Why an ACH Payment Isn’t Transferred Immediately

Every year, billions of Automated Clearing House (ACH) payments are sent throughout the United States. In 2020 alone, 26.8 billion ACH payments were processed, totaling $61.9 trillion in value.

With so much of our money transfer system relying on ACH payments, the network must be reliable and fast. To make sure they are secure and dependable, ACH payments are not instantaneous. Therefore, with every payment sent, you can expect some delay.

So what’s with the delay? And when can you expect a payment to go through?

ACH Payment Processing

ACH payments are processed through an intricate network of approvals, codes, and entities. Known as the ACH Network, this network is the system that facilitates sending money throughout the US.

To start, users must use an approved bank; for senders, the bank is known as an Originating Depository Financial Institution (ODFI or Originating bank). The recipient must use a Receiving Depository Financial Institution (RDFI).

The checks and balances in place along the ACH Network make this process so reliable, secure, and most used in the US. However, these checks and balances are why money transfers aren’t instantaneous!

The ODFI must approve every ACH payment that is sent, and then it must go through the Federal Reserve and the Clearing House itself before arriving at the destination (the receiver’s bank account at the RDFI).

There are also times when the payment might be rejected, and the payment entry would be issued a return code. The return code must be sent back to the ODFI and the Original depositor (Originator), and the issue must be rectified. The RDFI has 48 hours to issue ACH return codes, and this could be adding to the hold-up.

Because this process requires so many individuals and entities along the way, the processing times can vary from as little as three business days to five business days, or longer, depending on how long it takes for the issue to be fixed.

ACH Payment Transfer Times

ACH payment transfer times depend on when your financial institution processes ACH payment batches if they facilitate same-day ACH payments and a bank holiday.

Timelines for ACH Debits

ACH debits are when money is taken out of the bank account of the Originator. The standard ACH debit takes 3-4 business days (or banking days).

This means that by the end of the fourth business day, the money should be taken out of the account. Usually, if that doesn’t happen, a return code would have been issued already.

This timeline exists so that the RDFI has time to issue the return code (around 48 hours after the initiation).

Here’s what the process looks like when sending an ACH debit through Sila:

  • On Monday: A user requests an ACH debit.
  • Tuesday: Funds leave the other bank on Tuesday morning.
  • Wednesday: The RDFI has until Thursday morning (48 hours) to issue any return codes.
  • By Thursday: If no return code is provided, the funds are settled by 4 PM, and the ACH debit is issued at that time.

Timelines for ACH Credits

An ACH credit is when money is put into the account of the Originator. In this case, the ACH credit takes a similar amount of time as the ACH debit, 3-4 business days (or banking days).

The same factors, including return codes, customer verification, bank holidays, and if the bank uses same-day ACH transfers, all play a role in this timeline.

Here’s what an ACH credit looks like when using Sila’s ACH API:

  • Saturday: User requests an ACH credit with their bank (ODFI). Since Saturday is not a banking day, the request is considered on Monday.
  • Monday: The bank submits the ACH payment entry.
  • Tuesday: The RDFI has 48 hours—until Thursday morning—to report a return code. If all is well, the funds leave the RDFI on Tuesday morning.
  • Wednesday: The funds might arrive, but the ACH credit has 3-4 business days.
  • Thursday: The funds settle by or before 4 PM.

Same Day ACH Transactions: Expediting ACH Transfers

In 2016, Nacha, the National Automated Clearing House Association or the governing body that controls the ACH network and its guidelines, released expedited ACH transfers, called same day ACH transfers. Same day ACH transfers were introduced due to the demand for ACH transfers, and it allows some leniency for those users who have proven to be reliable.

Same day ACH transactions allow the financial institution two time slots for submitting an ACH payment, which means that banks can offer more ACH payment results multiple times during the day. Therefore, ACH payment processing times might take one or two business or banking days, and that’s it! It might even happen faster, and the recipient gets their money that day!

As of now, ODFIs submit same day ACH payments through two clearing windows:

  • 10:30 AM ET, with settlement occurring at 1 PM
  • 2:45 PM ET, with settlement occurring at 5 PM

For same day payments to be successful, RDFIs must deposit the funds by 5 PM on the RDFI’s local time. Virtually all ACH transactions are eligible for same day processing. International transactions (IATs) and transactions above $25,000 are not eligible.

Alternatives to ACH Payment Transfer Times

ACH is not the only way to send money. And for many peer-to-peer (P2P) money transfers, ACH is not even possible without a specialty app.

For many official money transfers, like that with government officials, banks, and entities like the IRS, bill payees, and for your wages, ACH is typically used. Luckily, you will likely experience fewer delays when you work with these entities as the group is already approved (and is unlikely to issue a return code).

The IRS, for example, might issue you an ACH credit for your tax refund, and typically that will only take three business days. Other times, the money transfer will be scheduled to arrive in a timely fashion, as is the case of employers paying wages. So even if it takes five business days to process, you won’t notice that time.

However, there are times when you can’t get around the ACH payment transfer times. Luckily there are alternative methods that you can use. You can use digital wallets, cryptocurrency, and P2P transfer apps.

Using Sila for Expedited ACH Payments

If you want to pay your bills using an ACH debit, you might consider paying your bills through alternative methods. Fintech innovators might consider building ACH payment APIs to send ACH debits or ACH credits far easier and help consumers make their bill payments on time.

With an ACH API like Sila, you can create a fully white-label and uses third-party APIs to ensure financial payment data security, verification, and bank account linking. Therefore, no sensitive data is stored in the app, your company, or even through Sila. It is offloaded for the utmost security and compliance.

Right now, many Americans are limited by the ACH Network systems. While the Sila app, once coded, can facilitate ACH payments, it can also offer expedited money transfers even to international users through the SilaUSD stablecoin.

With more options to send money in the US and globally, an ACH API with Sila makes sense.