What Is an ACH Deposit?
An ACH payment is a process by which funds are electronically transferred from one bank account to another using the Automated Clearing House (ACH) network. On the receiving end, an ACH deposit is a method of receiving funds directly into an account, commonly used for income, refunds or other types of deposits. ACH deposits are initiated as ACH credits , where the funds are pushed from the payer's bank account to the recipient's bank account.
How an ACH Direct Deposit Works
The following is the typical process for making an ACH deposit:
Authorization: The recipient provides the payer with their bank account information, including the account number and routing number. This information is necessary to identify the recipient's bank and the specific account where the deposit will be made.
Payer initiation: The payer, whether it's an employer, government agency, business or other entity, initiates the ACH deposit through their bank or a payment processor. They provide the recipient's bank account information, the deposit amount and any additional information required by their bank or payment service provider.
ACH network processing: The payer's bank or payment processor submits the ACH deposit request to the ACH network. The ACH network serves as the central system that facilitates the electronic transfer of funds between banks.
Originating Depository Financial Institution (ODFI): The payer's bank acts as the ODFI and is responsible for initiating the ACH deposit on behalf of the payer. The ODFI submits the deposit request to the ACH network and debits the payer's account for the deposited amount.
Receiving Depository Financial Institution (RDFI): The recipient's bank, known as the RDFI, receives the ACH deposit request from the ACH network. The RDFI verifies the recipient's account and ensures that it matches the account information provided in the deposit request.
Deposit posting: Once the RDFI verifies the recipient's account and the deposit details, the funds are credited to that account. The amount of the ACH deposit is added to the recipient's account balance.
Notification: Depending on the recipient's preferences and the bank's notification system, the recipient may receive a notification, such as an email or mobile alert, informing them of the successful deposit.