ACH (Automated Clearing House)

What Is ACH?

The Automated Clearing House (ACH) network is the batched US electronic funds-transfer system that moves direct-deposit payroll, contractor payments, vendor disbursements, recurring consumer debits, tax refunds, social security benefits, and most other non-card business-to-business and business-to-consumer payments inside the United States. ACH is operated jointly by the Federal Reserve’s FedACH service and The Clearing House’s Electronic Payments Network, and it is governed by the Nacha Operating Rules. In 2024 the network processed more than 33 billion payments worth over $80 trillion, making it the largest payments rail in the country by transaction count.

For US businesses paying domestic contractors and employees, ACH is the default rail. It is cheap, it is reliable, and it is the same rail the IRS, the Social Security Administration, and almost every large US employer already use for direct deposit.

Nacha Rules and the Two ACH Operators

ACH runs on the Nacha Operating Rules, a member-written rule book issued by Nacha that binds every Originating Depository Financial Institution (ODFI) and Receiving Depository Financial Institution (RDFI). The rules specify file formats, return reason codes, return time windows, originator due-diligence obligations, risk-management requirements, and the dispute regime that governs unauthorised consumer debits.

There are two operators that physically clear and settle ACH files:

• FedACH, run by the Federal Reserve Banks, the dominant operator by volume.
• Electronic Payments Network (EPN), run by The Clearing House, a private operator owned by large US banks.

The two operators interoperate, so an originator at a bank that uses FedACH can send to a receiver whose bank uses EPN, and vice versa, with cross-operator settlement at the end of each processing window.

Standard ACH vs Same Day ACH

ACH historically settled overnight in batched windows, with credit entries posting on the next business day and debit entries one to two business days after origination. Same Day ACH, launched in 2016 and expanded in three phases, adds intraday settlement for files submitted before specific cutoffs.

The Federal Reserve publishes the Same Day ACH processing schedule with three submission windows and three corresponding settlement times (https://www.frbservices.org/resources/financial-services/ach/faq/same-day-ach.html):

• Window 1. Submission cutoff 10:30 a.m. ET, settlement 1:00 p.m. ET.
• Window 2. Submission cutoff 2:45 p.m. ET, settlement 5:00 p.m. ET.
• Window 3. Submission cutoff 4:45 p.m. ET, settlement 6:00 p.m. ET.

Same Day ACH does not cover International ACH Transactions, future-dated entries, or Electronic Enrollment (ENR) entries. RCK and XCK entries are capped at $2,500 per item.

Per-Transaction Limits

Same Day ACH has a per-payment limit. The current limit is $1,000,000 per entry, effective March 18, 2022, applying to both credits and debits and to both consumer and business entries (https://www.nacha.org/news/same-day-ach-1-million-transaction-limit-guidance). The earlier limit was $100,000, itself raised from the original $25,000 cap. Nacha has announced a further increase to $10,000,000 per entry with an effective date of September 17, 2027 (https://www.nacha.org/news/same-day-ach-payment-limit-increase-10-million).

Standard (non-same-day) ACH has no Nacha-imposed per-entry dollar cap. In practice, the ODFI sets its own per-entry and aggregate exposure limits on each originator, based on underwriting and risk management. Large payroll providers and corporate originators routinely process individual standard ACH entries well above the Same Day limit.

Fees

ACH is materially cheaper than wires or card payments. Nacha sets a wholesale Same Day Entry Fee paid by the originating bank to the receiving bank (currently $0.052 per Same Day entry). FedACH and EPN charge operator fees of a fraction of a cent per entry. The originating bank passes through an all-in cost to business originators that typically runs $0.25 to $1.50 per entry depending on volume, with consumer outbound transfers often free.

By contrast, a domestic US wire on Fedwire or CHIPS typically costs $15 to $50 per transfer at the retail level, and card payments carry interchange of 1.5% to 3.5% of the transaction value. ACH economics are the reason US payroll, contractor payments, and B2B vendor disbursements predominantly run on this rail rather than on wires or cards.

ACH and US Contractor Payments

For US-based 1099 contractors with a US bank account, ACH direct deposit is the default. Settlement is next business day on standard ACH and same business day on Same Day ACH for files submitted before the relevant cutoff. There is no FX leg, no correspondent-bank chain, and no SWIFT fee. The originator pulls bank routing and account numbers (or, increasingly, uses Nacha-supported account validation services to verify the receiver before origination) and submits the credit entry.

Cross-border contractor payments are a different matter. The IAT format exists, but Same Day ACH does not apply to IAT, settlement timing depends on the foreign correspondent, and the FX leg is opaque. Most businesses paying international contractors use SWIFT, card-network payouts, or specialist cross-border providers rather than IAT ACH. See our companion entry on the SWIFT network for how cross-border bank rails work, and our explainer on paying international contractors from the US.

How Omnivoo Helps

Omnivoo Contract Management runs US contractor payouts on ACH and Same Day ACH where the contractor is US-based, with cross-border SWIFT for non-US contractors and EOR employees. Our payment flow batches contractor invoices into a single ACH origination after approval, validates routing and account data before submission, and surfaces the Same Day window cutoffs in the UI so finance teams hit intraday settlement when they need to.