What are EFT and ACH in Payments?

What is EFT and ACH in payments

What does ACH and EFT mean?

ACH stands for Automated Clearing House, which is an electronic network used for financial transactions in the United States. ACH transactions enable the transfer of funds between banks or financial institutions through a batch processing system. It facilitates various types of transactions, including direct deposits, bill payments, business-to-business payments, and person-to-person payments. ACH transactions are typically used for recurring payments, such as payroll deposits, loan payments, and utility bill payments.

EFT stands for Electronic Funds Transfer, which is the Canadian equivalent of ACH in the USA. It can also be used as a broad term referring to the electronic exchange of funds between different financial institutions. 

As a consumer, it’s likely you’re already familiar with ACH or EFT payments, even though you might not be aware of the name. If you pay your bills electronically rather than writing a check or if you receive a direct deposit from your employer, the ACH and EFT networks are the ones being used.

How does EFT and ACH differ from online payments?

Online payments typically refer to electronic payments using a credit card. Credit cards are by far the most popular and convenient for most ecommerce, recurring payments, and online services transactions.

ACH and EFT payments let you use your bank account information to make a payment rather than your credit card number. ACH and EFT are also not instant like credit card transactions. 

Why do some people use ACH or EFT?

ACH and EFT transactions are often more cost-effective than alternative payment methods. They typically have lower transaction fees compared to wire transfers or other payment options, making them a cost-efficient choice, especially for recurring payments or large-scale transactions.

The major downfalls of ACH or EFT are that it is a little more complicated to set up a payment and it takes more time for a transaction to be finalized. There are a few important benefits of ACH and EFT payments:

  •  For a merchant, it is cheaper to do an ACH or EFT transaction than a credit card transaction. Rather than a percentage and transaction charge like credit cards (2% and $0.25), ACH and EFT typically have a single transaction charge of something like $0.25 to $1.50.
  • ACH and EFT work well if you have people that want to pay but don’t have credit cards. 
  • Compared to using physical checks, ACH and EFT cut down on paperwork and have to go to the bank to deposit checks. ACH and EFT are fully electronic.

How long does an ACH or EFT payment take?

ACH and EFT payments typically take several business days to be completed. The ACH and EFT networks process payments in batches. Wire transfers are single payment transfers individually processed by people. This is one reason wire transfers are much more expensive. 

Once a bank receives the instruction to do an ACH or EFT transfer, they may take one or two business days to submit it. After the other bank receives the transfer, they might also hold the transferred funds for a period of time. Overall, it takes an average of 3 to 5 business days to transfer payments with EFT or ACH.


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