Even if you’ve never heard of ACH before, chances are, you’ve probably used it. But what is an ACH payment, and how exactly does it work? Short for “Automated Clearing House,” ACH is an electronic network that handles payments between banks. If you’ve ever received direct deposit to your checking account from an employer, that’s ACH deposit. If you’ve set up your utility bills to come right out of your account, that’s an ACH withdrawal.

As a personal user, when you send money to friends or family using any number of third-party apps such as Zelle, Venmo, or PayPal, these typically use ACH.

For a business, using ACH can be a great way of simplifying the transfer of money: setting up automated payments means you don’t have to chase down invoices or handle checks, cash, credit cards, or wire transfers.

What is an ACH withdrawal?

An ACH withdrawal is an electronic fund transfer where money is taken out of one financial account and deposited into another using the Automated Clearing House (ACH) Network. It’s an easy way of transferring funds in the USA, even if the sender and receiver are with different banks. It may sound very similar to a wire transfer, but there are some key differences between ACH vs. wire transfers, which we’ll address below.

With authorization, funds get taken out of the sender’s account, batched with other payments through the ACH network for processing, and then, after being cleared, are deposited into the receiver’s account. The ACH Network is managed by the National Automated Clearing House Association (NACHA), which is a nonprofit made up of multiple regional payment associations. They create and enforce the rules for ACH withdrawals and transfers.

How does an ACH withdrawal work?

Let’s say you’re a small business owner accepting payment for your products and/or services. Instead of chasing down invoices, you might prefer to withdraw funds directly from your customers’ accounts. This is especially convenient if the transaction is recurring, such as a monthly bill.

Here’s how an ACH withdrawal works:

  • The customer authorizes you to retrieve funds from their account, and provides you with their banking information.
  • You send the transaction details to your bank or ACH provider
  • Your bank/ACH provider requests the payment from your customer’s bank
  • Your customer’s bank makes sure there are sufficient funds in their account to make the payment, and, if so, they transfer the funds to you.

This can be a one-time transaction, or you can set it up as an automated recurring transaction.

The differences between an ACH and wire transfer

Wait a minute, what is an ACH vs. a wire transfer? Both are forms of electronic transfer, meaning moving money from one bank account to another. However, there are some key differences between the two. 

One major difference is in the processing speed for transactions. How long do wire transfers take to go through? They tend to be faster, with the funds appearing in the receiver’s account within one business day. Because ACH transactions are processed in batches, they can take 3-5 business days. For an additional fee, it is possible to process same-day ACH transfers.

ACH Transfer vs Wire Chart

Cost Differences

Wire transfers typically cost up to $35 to send, and there are sometimes fees to receive them as well. ACH transfers are usually free for both sender and receiver. For small person-to-person payments there is sometimes a small fee, typically around $1.


ACH transfers are reversible (under certain circumstances). Wire transfers are not. Because of this, ACH transfers tend to be safer for senders. If there has been a mistake in the payment amount or it was sent to the wrong account, banks will typically allow a reversal. 

Use Cases

Because banks won’t clear a wire transfer unless the appropriate funds are in the sender’s account, wires are usually used for big purchases, such as down payments. ACH payments, with their lower fees, are handy for smaller one-time transfers (such as to friends and family), or regular recurring payments.

International Transfers

Another key difference to consider: while there is an increase in international ACH transfers, they are currently mostly limited to the USA. If you’re transferring money internationally, wire might be the way to go.

If you need to send an ACH or wire transfer, we can help. NorthOne is a deposit account that allows you to make payments easily and keeps tabs on your money and finances. NorthOne keeps wire fees low at $15 to send or receive and ACH transfers are free for both parties.

How to make an ACH withdrawal

  • Set up your merchant account with an ACH provider.
  • Request ACH withdrawal authorization from your customer. This can be a written or recorded verbal agreement for either a one-time or recurring payment. If you’re setting up a recurring payment, you only have to do this once.
  • Record the customer’s legal name, bank’s name, whether it’s a checking or savings account, the account and routing numbers (found on the bottom of a check).
Check - What is an ACH Withdrawal
  • Input the customer’s information with your ACH provider, and submit! 

How to cancel an ACH withdrawal

As a customer – whether for a personal or business account – you can cancel the authorization for ACH withdrawals at any time. However, try to give yourself three business days for the cancellation to go through.

First, call or write the company that is withdrawing your funds and inform them you are revoking authorization. Then, let your bank know (some banks provide an online form for this). 

You can also stop future payments by sending your bank a “stop payment order” (a heads up, sometimes this comes with fees). Afterward, monitor your accounts to make sure funds are not being taken out – and let your bank know right away if you see unauthorized withdrawals.

As a business owner, you might hear from a customer requesting that you cancel their ACH withdrawals – be they one-time or recurring. No sweat! Just make the change in your ACH service provider, and call or message customer service for guidance if you have any questions.

ACH is a great option for businesses to receive smaller recurring payments, such as monthly subscription fees. If you have any further questions, just contact the customer service team at NorthOne. We’re happy to help through live chat, phone, or email.

NorthOne Makes ACH Withdrawals Easy