About ACH

ACH refers to electronic transfers sent through the Automated Clearing House network. It is a very common way to move money in the US and was created as a replacement for paper checks. For example, when you initiate a payment from the credit card side, the credit card company may use ACH to pull funds from your bank account to pay your bill. Suppose you have two accounts, A and B. The usual setup is to add B inside A as an external account, and then initiate a transfer, which is generally processed as an ACH transfer. In most cases, ACH is used to move money between two bank accounts in your own name.

Key Features

  • Transfer time: 1-2 business days
  • Maximum amount: varies, generally $2,000-$10,000
  • Information required: routing number, account number, account name, and account type; Trial deposits verification may also be required
  • Fees: usually $0
  • Transfer limits: generally used between two accounts in your own name; US domestic accounts only

Steps

Using Chase as an example, when you add an External Account, you need to enter the recipient bank's routing number, account number, account type, bank information, and other details.

After you fill everything out, you will usually be asked to verify your account information. A common verification method is Trial deposits. Chase will send two small deposits, usually under $1, to the account you want to add. Once you see those two amounts in the other account, you go back to the Chase side and enter the two amounts to complete verification. This step is important because it confirms that the account you are adding actually belongs to you.

After verification is complete, you can initiate an ACH transfer request from the Chase side.

Some banks now also use third-party login verification, such as Plaid or Stripe. This is usually more convenient. If the information matches, the external account can be added right away.

About ACH Push and ACH Pull

ACH transfers can be divided into ACH Pull and ACH Push. Suppose you have two accounts, A and B. If you initiate from account A and request that $1,000 be transferred from B into A, that is an ACH Pull from A's perspective. On the other hand, if you initiate from account A and send $1,000 to account B, that is called an ACH Push.

Using Chase as an example, if I add a US Bank account as an external account in my Chase account, then after verification I can start transferring money. During the transfer, you need to choose Transfer From, meaning where the money comes out of, and Transfer To, meaning where the money goes. Sending money out from Chase is an ACH Push. Chase now also offers real-time delivery, but the limit is relatively low.

Conversely, you can initiate an ACH Pull from the Chase side and pull money from US Bank into Chase.

The reason to distinguish between ACH Pull and ACH Push is that fees may differ by bank. Therefore, for a bank that charges an ACH Push fee, you can instead initiate an ACH Pull from another bank that does not charge for ACH Pull. Conversely, for a bank that charges an ACH Pull fee, you can use ACH Push instead. A common example is BofA, which charges for ACH Push. In other words, if you initiate an ACH Push from BofA to send money out, there is a fee ($3). A simple workaround is to add BofA as an external account at another bank and then complete the transfer using ACH Pull.

Fees

The vast majority of banks offer ACH for free, except for BofA's ACH Push fee. If you want the money to arrive faster, there may be an extra fee. You can see the fee on the ACH Transfer page, if any.

Limits

ACH limits vary by bank. Some banks have daily and monthly limits, while others base the limit on your account relationship or history. A partial summary is below:

  • Bank of America: $3,000 per day or $6,000 per month for standard delivery and $2,000 per day or $5,000 per month for next-business day delivery
  • Chase: $10,000 per transaction or $25,000 per day
  • Wells Fargo: Varies depending on your account history but typically $5,000 per day
  • Citibank: $2,000 per day or $10,000 per month
  • US Bank: Varies depending on your account history but typically $2,500 per day
  • Capital One: $10,000 per day or $25,000 per month

Things to Watch Out For

When using ACH Pull, pay close attention to whether the account being pulled from has enough available balance. If it does not, you may incur an overdraft fee. An ACH Pull does not necessarily remove the money from the other account immediately, so you need to make sure the other account has sufficient funds at the time the transfer is actually processed. Be sure to calculate carefully.

Summary

ACH transfers are very convenient.

  • Pros: can be done online, support transfers in both directions, generally have little or no fees, and usually arrive fairly quickly
  • Cons: you need to add the account in advance and complete account verification first; they are also generally used for accounts in your own name. They can only be used for transfers between US domestic accounts.

For introductions to other transfer methods, see: