KB113 - Understanding ACH Payments
What is ACH?
If you don’t know what ACH is then you are probably in the majority of the population but, whether you know it or not, most of the money you move around this economy moves via ACH, or Automated Clearing House. Your direct deposit paycheck and even most paper checks end up as ACH transactions.
Simply put, an ACH transaction is moving money from one bank account another. This can happen in many ways:
When you pay for anything with a paper check it will end up as an ACH transaction. Sometimes you even see his happen at a retail store where they will take your check, scan it and hand it back to you. Otherwise, once it is deposited at a bank it is converted to an ACH transaction.
When you receive a direct deposit (usually a paycheck), this is an ACH credit because someone is pushing money into your bank account. To set this up, most employers will ask you to provide a voided check.
When you buy something via financing (like a car or a home), they may ask you to enable automatic billing. With automatic billing the finance company is setting up an ACH debit relationship in which they will pull a predefined amount of money from your account each month. As with an ACH credit, to set this up the finance company will usually ask you to provide a voided check.
Companies engaging in ACH credits or debits ask for check copies to verify the accuracy of two important numbers at the bottom of your check:
The number on the left is your ABA Routing/Transit Number. This nine-digit number identifies the bank holding your account.
The number on the right probably looks familiar to you — it is your bank account number.
ACH is how money moves in today’s economy. In fact, in 2016 alone an estimated $43.7 trillion was transferred via 25 billion ACH transactions.
Is it Safe?
ACH is even more secure than mailing a paper check since your account information is encrypted at all times. By contrast, your account number and signature are plainly visibly on a paper check, which can be misdirected or lost in the mail between your office and ours.
Moving Money Accurately
When you want to pay your bill via ACH we ask that you provide us with the routing and account numbers for your bank account. Using this, we can load your account into our secure payment provider (currently Stripe) so that you can initiate payments on demand or even setup Auto Pay so that you don’t have to remember to pay monthly.
Unfortunately, with two longish numbers there is a non-trivial chance that people will accidentally typo these numbers. Usually, this means that the charge will fail, but in the worst case money could be taken from the wrong person’s bank account. This is bad for everyone, so Clearly takes additional steps to ensure that we are talking to the correct bank account before we initiate an ACH payment.
The most common way to verify an account is for Clearfly to send you some money (temporarily) and for you to then tell us how much we sent you. This is often referred to as micro-deposit verification.
Micro-deposit verification starts with Clearfly sending two small deposits (less than a dollar each) to your account. The deposits will usually show up the next business day, but can sometimes take 2-3 days, depending upon your bank. These small deposits usually stand out in your statement and the transaction description will be similar to the following text, though every bank is different:
CLEARFLY COMMUNI TRANSFER
Once you notice these deposits in your account — usually by checking your online banking or phone banking — you simply provide these two amounts back to us via our verification page. If the amounts match what was sent, then your account is verified and ready to make payments, just the same as mailing us a check, but without the monthly mailing hassle. Then, after a few days, you will see the micro-deposits reversed out of your account.