ACH vs EFT

ACH (Automated Clearing House) is actually a type of EFT (Electronic Funds Transfer), but the two serve different purposes and operate in distinct ways. Understanding the differences between ACH and EFT can help businesses and individuals choose the right method for secure, efficient payments.

What Is an EFT

An EFT (Electronic Funds Transfer) is a digital method of moving money from one bank account to another without the direct intervention of bank staff. This technology underpins a wide range of financial transactions that occur every day, making it a core part of modern banking and commerce. 

EFTs are processed through secure, computerized systems that enable fast, reliable, and often same-day or next-day transfers between accounts. They eliminate the need for paper-based transactions like checks, reduce processing time, and minimize human error. EFTs are widely used by individuals, businesses, and governments for various payment and deposit purposes.

Common examples of EFTs include:

• Direct deposit of payroll into employees’ bank accounts
• ATM transactions
• Debit card purchases
• Online bill payments
• Wire transfers
• Automatic loan or mortgage payments
• Peer-to-peer (P2P) payments

What Is an ACH Payment

An ACH payment is a type of Electronic Funds Transfer (EFT) that is processed through the Automated Clearing House (ACH) network, a U.S.-based system that facilitates the movement of money between bank accounts. 

ACH payments are commonly used for domestic transactions, especially those that are recurring, such as payroll, utility bills, and subscription services. Unlike wire transfers, which are typically faster and used for one-time or urgent payments, ACH payments are often processed in batches and may take one to three business days to complete. 

However, they are generally more cost-effective and reliable for high-volume or scheduled payments.

There are two main types of ACH payments:

• ACH credit – where the sender initiates a payment to push funds into another account (e.g., employer depositing payroll).
• ACH debit – where the recipient pulls funds from the sender’s account (e.g., utility company collecting a bill payment).

Key features of ACH payments include:

• Low processing fees compared to credit cards or wire transfers
• Scheduled automation for recurring billing or deposits
• Secure, regulated network managed by NACHA (National Automated Clearing House Association)
• Ideal for B2B and B2C financial transactions

ACH vs EFT

While closely related, ACH and EFT are not interchangeable terms—they describe different scopes within electronic payments. EFT (Electronic Funds Transfer) is a broad category that encompasses all types of electronic money transfers, while ACH (Automated Clearing House) payments are a specific kind of EFT processed through a particular U.S. network.

Think of EFT as the umbrella term under which ACH, wire transfers, debit card transactions, and online banking fall. ACH, on the other hand, refers specifically to transactions processed in batches through the ACH network, primarily within the United States.

Here’s how they compare:

• Scope:
  
  • EFT includes ACH, wire transfers, ATM transactions, debit card payments, and more
  • ACH is a subset of EFT, limited to batch-processed transfers through the ACH network
• Speed:
  
  • EFT can be instant or same-day (e.g., debit card or wire transfer)
  • ACH typically takes 1–3 business days, though same-day ACH is available in some cases
• Use Cases:
  
  • EFT is used for a wide range of electronic payments, including international ones
  • ACH is mostly used for domestic direct deposits, bill payments, and B2B transfers
• Cost:
  
  • EFT fees vary widely depending on the type (e.g., wire transfers cost more)
  • ACH payments are generally low-cost or free

ACH is one method of conducting an EFT, and it’s particularly valuable for low-cost, scheduled transactions within the U.S. EFTs as a whole cover a wider range of transactions and offer more flexibility in speed and geography.