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? Automated Clearing House (ACH) payments are electronic payments that pull funds directly from your checking account. Instead of writing out a paper check or paying with a debit or credit 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, such as your electric company, to pull funds from your account. This typically happens after you provide your bank account and routing numbers for your checking account, and give your authorization by signing an agreement with your biller. In most cases, you'll 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, such as monthly, in many cases. The biller initiates the transaction, and you do not have to take any action, which helps if you tend to get busy and forget to pay bills on time.

On-demand payments: You can also set up a link between your biller and your bank account, without authorizing automatic payments. This allows you to transmit payment funds only when you decide to, and you’re in control of your account.

Benefits of Paying with ACH

The main benefit of ACH is convenience. You'll make your payments more easily because you've automated 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 include:

  • No need to remember to make payments
  • No need to write out checks (which you would 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 makes an excellent choice for some of your most important bills, it does have 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, it’s just in the wrong account
  • You may forget what you’re paying for if you don’t actually see the bills come through, and keep paying for services that you no longer use

    In exchange for the convenience you get with ACH debit programs, you 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. You'll have fewer opportunities for a check to get lost or stolen, and money moves directly from your account to your biller’s account.

    Even though problems are rare, you’re protected under federal law if any ACH errors or fraud do turn up in your account. The only catch is that you need to act fast and report those problems to your bank within 60 days. Note that consumer protection laws only apply to your personal accounts. Any business accounts you have are not as well-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. ACH payments are also safer than Western Union money transfers because 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.