If you’ve ever transferred money, there’s a high chance you’ve used an ACH transfer. ACH stands for Automated Clearing House, an electronic payment and money transfer system that allows you to move money between banks without using cash, checks, credit cards, or wire transfers. 

There are two main types of ACH transfers: credit and debit.

ACH Credit vs ACH Debit: The Differences

An ACH credit transaction allows you to push money online into different accounts, either into accounts you own, or into those of your friends and family. 

An ACH debit transaction, on the other hand, involves money getting pulled from your account, for instance by a company to whom you owe money. 

While the differences between the two are minor, they are nevertheless important. ACH Credit

What is ACH credit? An ACH credit transfer is when money is moved into your bank account, like a direct deposit. Note that an ACH credit needs to be pre-funded, so if you are an employer pushing funds into the account of an employee, your account needs to have funds prior to making a transfer. 

ACH credit transfers are considered to be safe and reliable, much more so than checks, which makes them a popular form of payment. They take between 1-2 business days to occur. 

There typically isn’t a fee associated with money entering your bank account, like an ACH credit, but there is with money leaving your account, like an ACH debit (unless you use OnJuno!).

ACH Debit

An ACH debit payment is the most common type of ACH transfer. ACH debit transactions typically happen within 3-6 days, though they can be expedited within one business day as well. However, ACH debits are thought to be slightly less secure than ACH credit transfers because they require both a routing and an account number.

Note that an ACH debit transaction is different from an ACH debit card transfer, which usually has a fee of 1% of the total transaction associated with it. You probably use ACH debit transfers when paying your utilities, rent, or other recurring payments.

ACH Credit vs ACH Debit: Which is Best For Your Needs?

In order to use ACH transfers, you first need to have a US bank account. Using ACH transfers can be a lot cheaper than domestic wire transfers, and business credit cards often come with points and other perks that might be more ideal if you’re hoping to set up ACH transfers for your business. 

But, is ACH credit or ACH debit right for you? 

While ACH transfers are convenient, allowing you to use fewer checks, and track payments more easily, you also give up a degree of control if you use ACH debit programs. You’ll have to expose private information, such as your bank account details, though you are protected under federal law if ACH errors or fraud occurs, as long as you report it within sixty days. 

Once you’ve decided you want to use ACH transfers versus other forms of payment, figure out whether ACH credit or ACH debit is best for your needs. 

If you need to make business payments to contractors, transfer money between accounts, or make a purchase from a business, then you’ll want to use an ACH credit transaction.

If you need to make recurring payments like utility payments, mortgages, or pay suppliers every month, then you’ll need to use an ACH debit payment. Interest payments, tax refunds, and employer-reimbursed expenses also fall under the category of ACH debit payments. 

Ultimately, ACH transfers are a useful tool for making payments. Knowing the difference between ACH credit and ACH debit can help you figure out what works best for your business, or lifestyle.