ACH Mandate

What does ACH stand for?

An ACH is an electronic fund transfer made between banks and credit unions across what is called the Automated Clearing House network. ACH is used for all kinds of fund transfer transactions, including direct deposit of paychecks and monthly debits for routine payments.

Payments made through ACH transfers may be known as ACH direct payments. Direct payments may include the payments you make for taxes, loans, membership, recurring investment transactions, and more. On the other hand, receiving through ACH transfers may be known as ACH direct deposits. These transactions may include pensions, refunds, dividends, interest payments, reimbursements, and more.

What Is an Automated Clearing House Transaction?

An Automated Clearing House (ACH) transaction takes place between two banks. 

One, from where the debit transaction originates, and the second, with the receiving bank where the credit entry of the same reflects. To successfully complete your transaction, some banks may levy ACH charges. Meaning a fee may be involved, but not all banks levy these charges. 

It is an electronic transfer that takes place when you put in a request with your bank. These can only be initiated by the individual or entity that is making the payment, i.e., someone who wants to transfer and does not receive funds. Additionally, the type of transaction affects the applicable ACH charges. Meaning, not all ACH transactions carry a charge. ACH deposits do not have any charges, whereas ACH direct payments may come with nominal charges.

ACH vs ECS - A Comparison

The full form of ACH in banking is an Automated Clearing House. It is different from ECS in the following ways.

 

Types of ACH

ACH transfers can make transactions faster and more convenient. Primarily, there are 2 types of ACH transfers - direct deposits and direct payments. Direct deposit via ACH is used to receive payments directly. On the other hand, direct payments are used to regularly make payments to the payee.

Objectives of ACH

Depending on the type of ACH, the objectives vary. ACH direct payments and ACH direct deposits have different objectives.

1. ACH direct payments can be used in the following cases:

• Payment of taxes

• Payment of EMIs

• Subscriptions

• Gifts and donations that are recurring

• Tuition fee

• Mortgage loan payments

• Membership fees

• Recurring investments

2. ACH direct deposit is commonly used in the following scenarios:

• Payroll

• Pension

• Annuities

• Refund of taxes

• 401K disbursements

• Dividend payments

• Interest payments

• Expense reimbursements

What are eACH and eMandate?

eACH is typically an electronic ACH that allows the use of online portals and electronic transfers to ensure the success of a transaction. eACH can be used to either debit or credit recurring payments. ACH eMandate is a payment service brought about by NPCI (National Payments Corporation of India) to collect recurring payments.

How to Register for the ACH process?

Get the ACH form to start with the ACH mandate registration process. Then, fill up the required fields on the form. Out of a total of 19 fields, 14 of them are mandatory, such as IFSC code, bank account number, IIN number, MICR number, etc. So begin by filling them out first. Once you fill in all the information, ensure to submit the form to begin directly receiving transfers into your bank account.

Features & Benefits of ACH Mandate

Using ACH has several features and benefits. Let us have a look at a few of them.

1. Increased Transaction Speed

In the current times, several large-funded transactions take a few days to be successfully transferred. In most cases, checks are used to receive, send, and process payments. However, this process takes plenty of time. In contrast, ACH transfers take a matter of a few seconds to complete a fund transfer.

2. Convenience

ACH payments are easy to initiate and process compared to other modes of payment. These payments can also be processed automatically with pre-authorization. For businesses to automatically receive and review payments, in contrast, to automatically review checks.

3. Security

While many forms of payments, such as checks and DDs, are prone to security breaches, ACH is comparatively safer by leaps. As digital security measures continue to strengthen by the day, ACH provides more security when it comes to funding transfers.

4. Lower Costs

While crediting or debiting funds, it is undeniable that the fees and charges that come along are not looked forward to. ACH has lower processing fees and service charges compared to most other methods of fund transfer.

5. Accuracy

It is a common fact that we are prone to human error. While making manual entries to process funds, it can be easy to make mistakes leading to an unsuccessful transaction or transfer. So, reducing the physical handling of payments through ACH can improve accuracy. Moreover, with automated payments, there is less room for error as there is no human intervention.

All About the ACH Form

The ACH form helps with the ease of transactions made through ACH and ensures that the funds are directly credited to or debited from the bank account. A few important details have to be filled in the ACH form, such as the account number, IFSC code, MICR number, customer ID, and more. Once these details are filled in and the form is submitted, the funds will be directly transferred into your bank account.

Banks that Provide ACH

Several partner banks, such as Axis bank, Citi bank, RBL, HDFC, SBI, etc., offer ACH services. To begin filling up the ACH form with these banks, you could either visit the bank to get the form physically or you could go to the bank’s website to download the ACH form. Procure the form, and ensure to accurately fill in the required details such as MICR number, IFSC code, bank account number, phone number, email ID, and more. Once you fill in all of these details, submit the form to receive fund transfers directly to your bank account.

What are ACH Charges?

ACH mandate charges are essentially fees that are charged by certain banks and financial institutions. Typically, ACH transfers do not incur charges as much as other modes of transfer. However, certain banks charge transaction fees or service fees. The ACH charges are typically charged across 4 areas: credit fee, debit fee, discount fee, and account fee. As these charges depend on the financial institution, it is best to verify with the bank about their charges beforehand.

ACH Mandate Cancellation

Many people have ACH payments scheduled and pre-authorized regularly for certain payments and subscriptions. However, if you are looking to cancel your ACH mandate, you should either remove the subscription or contact the bank. Once you contact the bank, you will be asked to submit a request for the cancellation of the ACH mandate. Once you submit the request, depending on the bank, your ACH mandate cancellation process will begin and get cleared within 3-5 business days.