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Credit Card Terms - Automatic Check Handling (ACH)
A form of electronic payment. There are two ways payments can be transferred:
- 1. By wire transfer.
- 2. Through ACH.
While a wire transfer is an e-payment system that is designed to handle high-dollar, a time-crucial payment, usually between large banks, ACH is designed to be an e-check or electronic check. Unlike a wire transfer, an ACH is used to process higher volumes or small-dollar payments for settlement issues within one to two business days. All ACH transactions are settled in the same way checks are.
1. A clearinghouse takes all of the ACH files (received every day from member banks).
2. Then it divides them by the originating bank (where the check was either cashed or deposited) and the paying bank (the bank where the check was drawn).
3. Then it totals the accounts, and credits or deducts the accounts accordingly.
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