ACH Debit for Consumers

What is an ACH Debit Payment?

A woman putting money into a computer
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Wondering if you should use ACH debit to make your payments – and what that even means? ACH payments are electronic payments that pull funds directly from your checking account. Instead of writing a check or paying with a card (like a credit or debit card), the money moves automatically.

ACH can make your life easier, but it can also cause problems. Get familiar with the pros and cons so you know what to expect.

How ACH Debit Works

To pay with ACH, you’ll need to authorize your biller to pull funds from your account. This typically happens when you provide your bank account and routing numbers for your checking account (your authorization is somewhere in an agreement). In most cases, you do all of this on an online or paper form, but it might also happen over the phone.

Automatic payments: if you choose automatic recurring payments, your biller will pull funds from your account every time your bill is due (monthly, in many cases). The biller initiates the transaction, and you do not have to take any action.

On-demand payments: it’s also possible to set up a link between your biller and your bank account, but not authorize automatic payments. This allows you to send funds when you decide to, and you’re in control of your account.

Benefits of Paying with ACH

The main benefit of ACH is convenience. Making your payments is easier because you automate some or all of the process.

As a result, you have more time for other things, and you’re less likely to miss payments (which can lead to additional fees and other headaches).

Some of the most popular reasons to use ACH debit are:

  • No need to remember to make payments
  • No need to write checks (which you'll have to re-order once they're gone)
  • No need to get payments in the mail and pay postage
  • No need to wait for the postal service to deliver payments or worry about lost mail
  • Easier to track payments since payee names appear on your bank statement or financial software
  • More environmentally friendly (checks and envelopes use paper, and transporting them uses fuel)

Pitfalls of ACH Payments

While ACH debit is an excellent choice for some of your most important bills, there are a few drawbacks:

  • You hand over access to (and information about) your bank account, including your account number
  • A biller error may accidentally lead to you paying more than you should (and  a large error could drain your account, causing you to bounce other payments and rack up fees)
  • You might overdraw your account if you don’t keep enough money available in checking – you might have the money, but it’s just in the wrong place
  • You may forget what you’re paying for if you don’t actually see the bills come through, and you might keep paying for services that you no longer use

In exchange for the convenience you get with ACH debit programs, you have to give up some control.

Is ACH Debit Safe?

If you’re concerned about security, ACH is a safe way to pay. You only need to expose your bank account information once – when you sign up for electronic payments – as opposed to every month if you write checks monthly.

There are fewer opportunities for a check to get lost or stolen, and money moves directly from your account to your biller’s account.

Problems are rare, but you’re protected under federal law if there are ACH errors or fraud in your account. The only catch is that you need to act fast – report those problems to your bank within 60 days. Note that consumer protection laws only apply to your personal accounts (business accounts are not as protected).

Unlike wire transfers, ACH payments are not immediate and irrevocable. They are difficult to reverse, but it’s harder for a con artist to get your money and disappear literally overnight. They are also safer than Western Union money transfers – the recipient of an ACH payment generally needs a U.S. bank account, which requires that they provide enough identification for law enforcement to find them if the need arises.