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10 min read

Understanding ACH vs Credit Card Payments

As businesses scale and expand their operations, they often encounter payment-related challenges that can impede their growth. The traditional paper-based payment systems or even legacy technology that served them well in the past no longer suffice. The need for a more efficient, cost-effective and streamlined payment solution has led many businesses to explore ACH payments.

ACH, or Automated Clearing House, is a payment system that processes electronic payments and transfers funds between bank accounts. In recent years, ACH API (Application Programming Interface) solutions have emerged as a popular way for businesses to integrate with the ACH Network. Integrating with an ACH API can save businesses precious time and resources, reduce errors and fraud, and enhance their overall payment processing capabilities.

Whether you're a small startup or a large enterprise, integrating with an ACH API can help you streamline your payment processes, reduce costs, and improve customer satisfaction.

Topics covered in this article:

What is an ACH Payment?

ACH stands for Automated Clearing House. The ACH Network is a network of banks and financial institutions that process billions of transactions each year. Every year, this powerful network moves the equivalent of the GDP of the United States—the largest economy in the world—twice. The network is governed by Federal Reserve Bank regulation and the National Automated Clearing House Association (Nacha), which makes the network’s rules.

Under the ACH umbrella, bank-to-bank transfers are processed reliably via the ACH Network. An ACH payment is also commonly referred to as an ACH transfer or an ACH transaction. These terms are used interchangeably to describe the electronic movement of funds between bank accounts using the ACH network.

Types of ACH Transactions: Credits and Debits

There are two types of ACH transactions: credits and debits.

An ACH credit or “push” transaction involves sending money to a bank account, such as an employer depositing a paycheck directly into an employee’s bank account. An ACH debit or “pull” transaction involves withdrawing funds from a bank account, such as a lender automatically withdrawing monthly car loan payments from a borrower.

For both transaction types, the party initiating the transaction (also known as the originator) needs to collect bank account information and authorization to credit or debit the bank account.

Check out our ACH 101 resource for a deep dive into the ACH process and ACH credit and debit transactions.

Explaining ACH Credits & Debits

ACH Send Flow: Originator to ODFI to ACH provider to RDFI. Then End of Day Settlement Federal Reserve to ODFI and RDFI to debit/credit accounts.

An ACH credit or “push” transaction is initiated by the payer of funds and pushes money to the receiving party.

An ACH credit is when the funds are electronically deposited into a bank account. Think of an ACH credit as money coming to you, rather than being deducted from your account like an ACH debit.

There’s a good chance that you have seen a ‘pending ACH credit’ listed on a statement entry line on your bank’s website. One of the most common pending ACH credits that people encounter is through an employer’s direct deposit.

ACH Receiving Flow: Originator to ODFI to ACH Provider to RDFI. Then End of Day Settlement Federal Reserve to both ODFI and RDFI to debit/credit accounts.

An ACH debit or “pull” transaction is initiated by the receiver of funds and pulls money from the paying party.

In both cases, the ACH transaction is entered into the ACH payments system by an originator. The originator is responsible for obtaining the required authorization for each transaction.

Then, the originator delivers the ACH transaction to its chosen ACH operator—either the Federal Reserve or the Electronic Payments Network. If the transaction is a “push,” the ODFI (Originating Depository Financial Institution) will also debit its customer’s account before forwarding the transaction onto the ACH operator.

The ACH operator performs a switch role, passing the transactions on to the RDFI (Receiving Depository Financial Institution). If the transaction is a “pull,” the RDFI will debit its customer’s account upon receipt.

After settlement, the ODFI and RDFI will credit its respective customer’s account based on the type of transaction.

ACH withdrawals are commonly associated with online transactions to pay bills and make purchases.

After providing your bank account and routing number for an ACH debit, an ACH withdrawal happens when funds are deducted from your account after providing bank account and routing information.

Consumers can associate an ACH withdrawal with online transactions to pay bills or making purchases online.

ACH Transfer Speeds

Businesses can choose from several different ACH transfer speeds to find the balance between speed and cost for their use case.

With a Standard ACH transaction, it can take up to 3-5 banking days after a transfer is initiated for the funds to be available to the recipient. For those who need faster speeds, Next Day ACH (exclusively through Dwolla) makes funds available the next business day for debit transactions, while Same Day ACH allows a credit to or debit from a bank account to settle within the same business day.

ACH Transfer Times

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What is an ACH API?


An ACH API is a convenient and efficient way for businesses to connect to the ACH Network and take advantage of its benefits. The API acts as a bridge between a business’s application and the ACH Network, allowing for seamless communication between the two systems. It also lets businesses automate their ACH transactions so they can eliminate time-consuming and expensive manual processes.

By using an ACH API, your developers can embed software into your platform, facilitating ACH payments and giving you complete control over the user experience for your customers. The ACH API provider, such as Dwolla, handles the technical aspects and intricacies of connecting to and sending and receiving payments through the ACH Network.

ACH API Developer Documentation

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Why Use An ACH API?

An ACH API helps businesses solve many challenges associated with sending, receiving, and facilitating payments.

Lower Costs

In general, the costs of ACH come in much lower than other payment methods. When comparing the fees between credit cards and ACH payments, credit card payments have higher processing fees since they are typically calculated as a percentage of the transaction. Paper checks also are more expensive because of the costs involved with processing, printing, and mailing them. Wire transfers are not only costly but require manual processing on both ends of the transaction. ACH transactions can cost pennies to initiate and in some cases are free. Excluding cash transactions, ACH transactions have some of the lowest transaction fees.

Increased Security

In addition to having lower processing fees, funds that are transferred directly to a verified bank account can be more secure. Credit cards have a high incidence of fraud, while the manual process around paper checks leaves room for human error and opens up the possibility for the check to be stolen during mailing.

Participation in the ACH network, however, requires adhering to strong security and data requirements. Bank account verification helps ensure funds are going to and coming from actual bank accounts without a suspicious history. ACH API providers often offer additional integrations for businesses needing bank account and identity verification services.

Eliminate Manual Processes and Paper Checks

ACH transactions and, more specifically, ACH APIs allow businesses to automate their manual payment processes that cost a lot of time and money. ACH APIs automate repetitive processes such as data entry, verification, and confirmation of payments. No more processing, mailing and tracking paper checks as part of your payment operations! This reduces the risk of errors and cuts down on costs associated with manual labor, leading to more payment efficiency and more time for your business to focus on what’s important.

Other ACH API Benefits

Other benefits of integrating with an ACH API include:

  • Increased confidence in payment confirmations, since ACH returns are different from credit card chargebacks.
  • Better insight into when and why payment failures happen.
  • Scalability as your business grows.
  • Simplified integration and customization of a white-label solution into an existing business operation.

Explore the Dwolla API

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ACH API Use Cases

“…I think ACH in general makes sense so investment returns aren’t impacted by high transaction fees. And once you decide to go with ACH, Dwolla was really the only game in town.” – CEO of investment platform.

More and more consumers expect a digital payments experience and businesses that fail to adapt risk falling behind. Integrating with an ACH API is a simple yet powerful solution that can help businesses stay ahead of the curve.

  • Payroll processing: Automating payments for a more streamlined experience, eliminating manual errors and saving time.
  • Marketplace payments: Streamline the transfer of funds between multiple parties and reduce the risk of fraud.
  • B2B Payments: Businesses can transfer funds between accounts electronically, reducing the need for paper checks and wire transfers.
  • P2P Payments: Facilitate peer-to-peer (P2P) payments between individuals or businesses. This feature allows for the quick and secure transfer of funds between bank accounts without the need for cash or checks.
  • Lending and Loan Repayments: Automate loan repayments, making it more convenient for borrowers. It also reduces the risk of late or missed payments, as payments can be scheduled and processed automatically.

Here are some examples of how Dwolla customers have used Dwolla’s ACH API.


Insurance Platform Uses ACH Payments for Efficient Claim Reimbursement

  • Embrace Pet Insurance started searching for a more efficient reimbursement solution to help scaling efforts, it was a collaborative effort across accounting, engineering and strategic teams.
  • Embrace Pet Insurance onboards thousands of policyholders on a monthly basis. Implementing ACH payments has allowed their customers to claim reimbursements 5 days faster than with a paper check.
  • Electronic ACH payments save this insurance company over 92% in costs vs. paper checks.
  • Reimbursement efficiencies improved by over 800% by switching from paper checks to ACH.

Investment Platform Facilitates Art Buying with ACH transactions

  • Masterworks uses standard ACH transaction timing not only as a check against fraud but also as a peace-of-mind payment method that lets them know how much money is in the bank and when it will arrive.
  • Since going live with Dwolla, Masterworks went from transferring “a couple hundred thousand dollars” through the Dwolla Platform to facilitating tens of millions a month in art investments.
  • For Masterworks’ end users, having the ability to make a quick and easy investment is a significant step in making art acquisition more accessible. The flexibility and ease of ACH payments with Dwolla means the API works in the background with little to no intervention from the company’s engineers.
  • Payment volumes scaled by 200% using ACH transactions.

Real Estate Platform Uses ACH for Inexpensive, Quick and Reliable Payments

  • Real estate companies and escrow holders use DepositLink to collect earnest money deposits and commissions electronically, eliminating the need to manually deliver paper checks or conduct real estate transactions in person.
  • When DepositLink first implemented Dwolla’s payment API, the company used standard ACH transaction timing to facilitate real estate payments. When clients started requesting faster payment options, DepositLink added Same Day ACH payments to their suite of features.
  • After adding Same Day ACH transactions they experienced 212% growth in new client contracts, 376% growth in payment transactions and 483% growth in the dollar amount of funds transferred through the platform.
  • The technology team can easily toggle between Standard ACH and Same Day ACH transfers, depending on the end user, risk factors or use case.

Whether you’re building a platform for investing, a marketplace or service that needs to send mass ACH payouts programmatically, or an app that needs peer-to-peer bank transfers—we’ve got you covered.

In Short

By implementing ACH API solutions, businesses can take advantage of the latest payment technologies and scale their operations with ease. As you consider the best payment solutions for your business, remember that an ACH API provides a powerful tool for automating payment processing, reducing costs, and improving efficiency. At the end of the day, a reliable payment system is crucial for your business success, and an ACH API can help you achieve that.

So, if you're looking to take your payment processing to the next level, consider integrating with an ACH API today.

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