ACH Credit Transactions and Direct Deposit Process

ACH Credit Transaction Overview

• The payer in a typical ACH credit transaction is often the employer or party initiating payment, typically a bank or credit union.
• Employees authorize the deposit of their paycheck through direct deposit, allowing employers to automatically transfer wages into their bank accounts.
• The employer’s financial institution verifies direct deposit payroll ACH files, ensuring accuracy and compliance before submitting them to the ACH network.
• The ACH operator routes the transaction to the payee's financial institution, which is where the employee holds their account and receives the deposited funds.
• The settlement of the transaction between participating financial institutions occurs through the ACH network, which facilitates the netting of debits and credits between banks.

Test your knowledge on ACH credit transactions and the roles of employers and employees in the direct deposit process.