Automated clearing house (ACH)

The Automated Clearing House (ACH) is a vast electronic network that connects banks, credit unions, and all other financial institutions. The Automated Clearing House is the system that is responsible for the processing of all electronic fund transfers (EFT), such as credit card transactions.

All third-party processors, issuing banks, and acquiring banks must utilize the Automated Clearing House to process, clear, and settle electronic funds transfers, including transferring funds from credit card sales to a merchant’s direct deposit account (DDA).

Because all credit card transactions are settled using the same ACH system, it would be untrue if any merchant bank or ISO were to claim that they are able to deposit funds into a merchant’s bank account faster than any other institution or merchant service provider. It’s helpful to think of the ACH as a financial information super highway that every financial institution must use. If there is a traffic jam, every institution will be affected.