ACH Terms

ACH - The Automated Clearing House network

ACH NETWORK - The funds transfer system governed by the rules of the National Automated Clearing House Association (NACHA) which provides for the inter-financial institution clearing of electronic entries for participating financial institutions.

ACH OPERATOR - The central clearing facility that receives entries from the Originating Depository Financial Institutions (ODFI), distributes the entries to Receiving Depository Financial Institutions (RDFI), and performs settlement functions. It provides services to Depository Financial Institutions (DFIs)on a local, regional or national basis. ACH Operators may be private companies or offices of a Federal Reserve Bank. The ACH Operator is responsible for processing electronic entries received from other ACH Operators or ODFIs.

AUTHENTICATION – A data security technique used to ensure that the professed sender of information or a payment order is actually who they claim to be.

AUTHORIZATION - A written agreement signed or similarly authenticated by an employee or customer, that allows the posting of debits or credits arising from ACH transactions to the receiver's account.

BANKING DAY - Any day on which the DFI (Depository Financial Institution) is open and accepting banking transactions.

BUSINESS DAY - A calendar day other than a Saturday, Sunday, or Federal holiday.

COMPANY/BUSINESS - An individual, sole proprietorship, partnership, or corporation engaged in a commercial enterprise or venture.

CONSUMER ACCOUNT -  An account held by a DFI and established by a natural person primarily for personal, family or household and not for commercial purposes.

CORPORATE CREDIT OR DEBIT (CCD) –  Debit, credit or non-monetary entries used to facilitate business-to-business ACH Payments. It can have one addenda record with remittance information attached.

CORPORATE TRADE EXCHANGE (CTX) – Entries are debit or credit entries used to facilitate business-to-business ACH Payments.  It can have up to 9,999 addenda records with remittance information attached. Typically used to pay multiple invoices that are listed in the addenda records, although it may be used for a single invoice.

CREDIT ENTRIES - An entry to the record of an account to represent the transfer or placement of funds into the account.

DEBIT ENTRY - An entry to the record of an account to represent the transfer or removal of funds from the account.

DIRECT DEPOSIT - A deposit made to a consumer's account at a receiving depository institution through the ACH Network. Typically refers to payroll deposits, social security payments and pension payments.

DIRECT PAYMENTS - A charge to a receiver's account at the receiving depository financial institution through the ACH Network. Examples of direct payments include insurance, utility, mortgage, and car payments.

EFFECTIVE ENTRY DATE – The banking date the originating business or individual has requested that the entry posts to the receiver's account.

ELECTRONIC AUTHORIZATION - An alternative means of authorization for ACH transactions. Electronic authorizations must be displayed in such a manner that the consumer can read the authorization, create a record or hard copy of the authorization (so the consumer can refer to it) and must be authenticated in a similar manner to that in which a signature authenticates a written authorization (i.e., by a digital signature, PIN, or other code which uniquely identifies that consumer).

ELECTRONIC FUNDS TRANSFER -  A generic term used to describe any ACH or wire transfer, or consumer debit card transaction.

ELECTRONIC SIGNATURE - An electronic sound, symbol or process attached to or logically associated with an agreement, authorization or other record and executed or adopted by a person with the intent to sign the record.

THE FEDERAL RESERVE - The "central bank" of the U.S made up of twelve banks districts. All national banks are required to be members while other state-chartered banks can choose to be members. The Federal Reserve serves as an ACH Operator that receives files of ACH payments from ODFIs to deliver to RDFIs and settle the payments by crediting and debiting the DFI’s settlement accounts.

FILE -  A group of ACH batches transmitted electronically into the ACH Network via data transmission between the sending point and the receiving point. A file may contain one or more batches of entries.

INDIVIDUAL IDENTIFICATION NUMBER - The number used by the originating business to identify the individual being paid (direct deposit) or charged (automatic debits).

MICRO-ENTRY - A credit or debit entry used by an Originator for the purpose of verifying a Receiver's account or an individual's access to an account.

NACHA - The National Automated Clearing House Association that establishes the standards, rules and procedures that enable financial institutions to exchange ACH payments on a national basis.

NOTIFICATION OF CHANGE (NOC) -  A Non-Monetary entry transmitted by an RDFI for the purpose of identifying incorrect information contained with an entry and providing correct data to be used on future entries. Notifications of Change are commonly referred to as NOCs, however the standard entry class code for these entries is COR.

ORIGINATING DEPOSITORY FINANCIAL INSTITUTION (ODFI) - A participating financial institution that originates ACH entries to an ACH Operator for transmittal to an RDFI. 

ORIGINATOR - Any individual, business, or other entity that has authorized an ODFI to transmit and entry to the Receiver’s account at an RDFI.

PRE-ARRANGED PAYMENT OR DEPOSIT (PPD) – Entry is a credit or debit entry originated by an organization to a consumer’s account, based on standing or single-entry authorization from that consumer.

PRENOTIFICATION ENTRIES (PRENOTE)-  A non-monetary ACH entry with a special transaction code. If you choose to initiate a prenote, it must be initiated at least 3 banking days before the first live dollar transactions are to be sent. Receiving institutions are required to check the transit/routing number and account number fields to ensure the account is a valid open account.

PROCESSING DAY - Any day that the Federal Reserve and a DFI is open to the public to conduct business or that an ACH facility is being operated.

RECEIVER - An individual, corporation, or other entity that has authorized an originator to initiate a credit or debit entry to a transaction account held at a receiving financial institution.

RECEIVING DEPOSITORY FINANCIAL INSTITUTION (RDFI) – A participating depository financial institution that receives entries directly or indirectly from its Automated Clearing House Operator for debit or credit to the accounts of its customers.

RETURN ENTRY - An entry that has been returned to the ODFI by the RDFI because it cannot be posted. The reason for each return is included with the return in the form of a "return reason code".

REVERSING FILE OR ENTRY (REVERSAL) – A credit or debit Entry/File that reverses a previously originated Erroneous Entry/File.

ROUTING/ TRANSIT NUMBER – A nine-digit numerical code used to identify a banking or other financial institution for the purpose of clearing funds or processing checks in the United States.

SAME DAY ENTRY– An entry in which the Effective Entry Date is the same Banking Day as the date on which the Entry is Transmitted by the ODFI to its ACH Operator by the deadline for same-day processing and settlement. A Same Day Entry must be for an amount of $1,000,000 or less. An Entry with a stale or invalid Effective Entry Date will be transmitted with the earliest available date, so may be sent as a Same Day Entry.

SETTLEMENT DATE - The day on which funds settlement occurs through the Federal Reserve Bank(s) with respect to an ACH entry. 

TRACE NUMBER - A unique number assigned to every ACH entry by an Originating Depository Financial Institution which identifies that entry within a specific ACH file. The first 8 digits of the trace number are the transit/routing number of the ODFI (without the 9^th character check digit), and the last 7 digits are sequence numbers assigned by theODFI.

TRANSACTION CODE - Also known as a Tran code, this is the two-digit code in the ACH record that determines whether an entry is a debit, credit or non-monetary entry to a savings, DDA, general ledger, or loan account.