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The complete guide to ACH payments

Running your own business is about following your passions and creating something new. But, as many entrepreneurs quickly find out, it’s also about bookkeeping, making payments, and keeping up with all the necessary jargon. If you’ve been in business for more than a minute, you’ve likely heard of ACH payments, but there’s a good chance that, like many others in your position, you’re a bit confused by what they actually are.

Don’t sweat it. We’re here to help you sort this out so you can focus on running your business and not on running to a dictionary. Below we’ll go over some of the most frequently asked questions about ACH payments.

What are ACH payments?

ACH (Automated Clearing House) payments are a type of electronic funds transfer (EFT) made through a network of financial institutions (also known as clearing houses). The network allows for the secure electronic transfer of money between bank accounts in the U.S.

What are the different types of ACH payments?

There are two main types of ACH payments:

  • ACH credit: Payments initiated by the payor that are sent directly to the receiving account. ACH credit can be anything from social benefits to payments for goods and services. This is the most commonly used type of ACH for business-to-business (B2B) transactions. One popular form of ACH credit is direct deposit, typically used by employers to pay salaries.
  • ACH debit (also known as a direct payment or ACH withdrawal): These transactions are initiated by the recipient, who sends a payment request to the payor’s bank. The bank then pulls the funds out of the payor’s account, sending it to the requesting party. One use for direct payments is the automatic collection of recurring utility bills or rent.

Is there an official organization that oversees ACH payments?   

ACH payments and the ACH network are governed and regulated by non-profit organization NACHA. NACHA works closely with government agencies, including the Federal Reserve, U.S. Treasury, and state banking authorities, to ensure the payment process is safe and reliable and that both parties are who they say they are.

Are ACH payments safe?

ACH payments are specifically designed to protect your data and prevent fraud. Unlike checks or cash, they are always documented and trackable, so you’re never surprised by an unlisted payment.

Payments made through the ACH network are also encrypted to minimize the risk of your payment or data being forged, lost, or stolen.

And then there’s NACHA, which enforces strict security measures and protocols on member institutions to ensure ACH transactions are a safe and reliable tool for both the senders and recipients of the payments.

How long does an ACH payment take to process?

When sending a standard ACH payment, you need to account for 1-3 business days for processing.

This means that if you send the funds on Monday morning, it could take until Thursday for your vendor to see the money in their account. If you’re looking for instant payment solutions, you may want to consider other options.

If you use Melio, for example, you can choose to pay with a credit card, and your vendor will receive the payment to their bank account via ACH the next day. We charge a nominal fee of 2.9% for this type of transaction, and it also allows you to collect points and cashback on your business transactions and defer payments until your next billing cycle.

How does an ACH payment differ from a wire transfer?

Both ACH payments and wire transfers are electronic payment options, but they have some distinct differences between them:

  • Speed: Wires are processed on the same day, while standard ACH payments can take a couple of days to reach their destination.
  • Cost: Wire transfers are typically more expensive, costing around $25-$30 per transaction. ACH payments are far cheaper (and even free when using a service like Melio).
  • Safety: Regulations enforced by NACHA, make ACH payments more secure compared to wires. Account details and other sensitive data remain confidential and encrypted throughout an ACH transaction. Also, unlike wires, ACH transfers have a grace period of up to 60 days that allows you to recover funds lost due to fraud or error.

So, which is better: an ACH payment or a wire transfer? 

That depends on the needs of your business, your customers, and your vendors. Wires are better for urgent or unexpected payments, while, thanks to their reliability and low cost, ACH transfers are better for standard payments that can wait a couple of days. There are also expedited ACH options that can be cheaper than wires.

Can and should I use Melio to send and receive ACH payments?

Yes, yes, a thousand times yes. You can use Melio to send and receive ACH payments as long as both you and the other party are registered as businesses in the U.S.

What is the cost of ACH payments? 

The typical cost of an ACH payment ranges between $0.2 and $1.5 per transaction. That’s already pretty low compared to other business payment options out there.

If you’re looking for a little extra saving, digital bill payment solutions often offer ACH at no additional fee, cutting that down for you to exactly $0. Before you ask, yes, Melio is one of those services.

And, if you need a faster option, Melio charges a fee of just 1% (up to $30 per transaction) for same day ACH.

What are the benefits of ACH payments for small businesses?

Small and medium-sized businesses (SMBs) face unique challenges—in terms of cash flow, staff, and access to resources—that larger companies are less prone to.

Here’s why switching to ACH payments can help growing businesses thrive as well as save time and money:

Faster payments

While ACH may not be the fastest payment method available, it is still lightning-fast compared to paper checks. That’s crucial because, while it never ceases to amaze us, paper checks are still among the most prominent B2B payment options.
The difference between getting paid within several days and waiting around for a paper check to arrive in the mail—not to mention the additional bank processing time once it’s deposited—could mean the world for a small business in a cash crunch.
Paying with a check also causes issues because the payor never knows when the money will be deducted from their account. There are just too many variables to consider: when the check will arrive, how long it’ll take the vendor to process and deposit it, and, finally, how long it’ll take the bank to make the withdrawal. A surprise bank charge can easily drain an account at the wrong moment, disturbing the delicate balance required to maintain a healthy cash flow.

Reliable and safe

With smaller cash reserves, lost funds are a real threat to the financial health of SMBs. While a larger enterprise may be able to absorb losses due to fraud, theft, or error, for SMBs, every penny counts.
This makes choosing ACH payments smart for small businesses as they are encrypted and less prone to malicious or incidental intervention than wires, checks, or cash transactions.


One of the most important things for any growing business is maintaining control over its finances. That becomes so much easier with ACH payments.
Each transaction has a unique tracking number that lets both parties know exactly where every payment stands at any given moment.


You may not realize it, but your business is likely spending a hefty sum every year just on the act of paying the bills.

When they think about the costs of making payments, most people only consider the high fees of wires (up to $30 per transaction) but other methods also have associated costs that can really add up.

If paying by paper check, you should take into account the cost of the check itself, the envelope, the stamp, and the time spent on writing and sending it, which, according to Bank of America, can amount to $4-$20 per check. If you have, for example, five bills due a month, you could be spending up to $1,200 a year, just on the added costs of sending out the checks.

Even paying by cash adds up, as most banks and ATMs charge a fee of around 2% per withdrawal. So, if you need $5,000 in cash to pay the bills this month, and you have to go to the bank to get it, you’re already short about $100.

ACH payments, on the other hand, are among the cheapest payment methods out there. They usually cost less than $2 per transaction and are even free if you use Melio. It’s pretty much a no-brainer, right?

Let’s get started!

Now that we’ve covered the fundamentals of ACH payments and why they’re good for your business, you can start using them as soon as today. After all, they are a convenient, cost-effective, and safe way to make paperless online payments.

Sign up for Melio, and in just a few clicks, you can get started with ACH payments at absolutely no cost. It’s that easy.

*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.