Real-Time Payments vs ACH: Guide to Features and Fees

We’ve already covered several key US payment systems in our previous guides, such as our articles on ACH, Same-Day ACH, FedNow, and RTP.

Today, let’s switch gears and discuss the pros and cons of two of these systems, as well as how you should decide between them for your organization. 

Real-Time Payments vs ACH: What’s the difference?

If you’ve tried to move money for your business within the US, you have probably come across two popular payment systems: ACH and RTP. 

While both payment rails can help you initiate and receive money between bank accounts in different financial institutions, there are significant differences between the functionality and applications of these two systems. 

These differences can be summed up as follows:

If you would like to understand each of the differences outlined above in more detail, read along as we go through all of these items one by one.

What are ACH payments?

Automated Clearing House (ACH) payments are an electronic payment rail for transactions within the US. 

ACH has been operating since 1972 as an alternative to paper checks and cash payments. The network’s rules are determined by Nacha (or the National Automated Clearing House Association), while the payments are processed by The Federal Reserve and The Clearing House.

ACH payments are processed in batches four times a day during banking hours and can be divided into two key types:

• Credit Push (Direct Deposit) – sender initiates the payment, pushing money out of their account.
• Debit Pull (Direct Payment) – receiver initiates the payment with authorization from the sender, pulling money out of the sender’s account.

You can learn more about ACH in our dedicated guide here.

What are real-time payments?

Real-Time Payments (RTP) is a much newer payment rail, introduced in the US in 2017.

This payment method is operated by The Clearing House, who also process ACH payments. The network’s rules are determined by the RTP Business Committee. 

Like ACH, RTP is also a purely electronic payment method. However, RTP only supports credit push transactions.

You can learn more about RTP in our dedicated guide here.

The Differences

Speed

ACH payments can be made via one of two speed options: same-day or next-day. True to their names, same-day ACH transactions are typically processed within one working day, while next-day ACH transactions post within two working days. ACH transactions clear and settle in batches during pre-defined processing windows at 8:30 a.m. ET, 1:00 p.m. ET, 5:00 p.m. ET and 6:00 p.m. ET.

RTP transactions, on the other hand, are processed in real-time. Every transaction is cleared and settled individually, with confirmation messages sent to both the sending and receiving parties. 

Limits

The ACH network does not have a transaction limit for slower speeds. The fastest transaction option (same-day ACH) is only available for payments up to $1,000,000 in value.

RTP has the same transaction value limit as same-day ACH, capped at $1,000,000.

Availability

ACH is available at all financial institutions in the US However, some banks have not enabled same-day ACH transactions for their customers.

RTP, on the other hand, is optional for financial institutions to opt-in. It reaches around 61% of US demand deposit accounts (DDAs).

Processing hours

ACH payments are only settled when the Federal Reserve is open. This means that ACH transfers do not get settled on:

• Weekends
• National Holidays
• Evening and night hours (between 6 p.m. and 8:30 a.m.).

RTP payments are processed and settled all the time, 24 hours a day, 7 days a week, 365 days a year.

The future of payment processing

According to a 2021 survey by the Federal Reserve, more than 60% of consumers want their payments to be posted immediately with real-time account balance updates.

Both businesses and consumers around the United States are starting to expect real-time payment options. This isn’t surprising, since the US is lagging behind other countries in terms of real-time payment availability. In 2020, the amount of real-time transactions initiated around the world grew by 40%. 

As consumers get accustomed to moving money online through mobile apps, businesses want to implement faster payments to meet those new expectations and gain a competitive advantage. 

Additionally, businesses hope to benefit from the increased flexibility and control that faster payments can provide. 

Which one should you use?

If you have access to RTP for a transaction, you should probably use it for most situations. Generally, RTP is not significantly different in price to same-day ACH, and the benefits of faster processing outweigh any small price differences.

However, many transactions are not eligible for RTP payments. To use this rail, both your and the other’s party’s banks must have opted-in as participating institutions in the RTP system. Furthermore, many larger businesses might be limited by the $1,000,000 value transaction limit, making both RTP and same-day ACH payments impractical for B2B use cases.

Additionally, you should consider how urgently you want the money settled. If you need a payment completed quickly and outside of business hours, RTP is the best choice. If a payment is not time-sensitive, the cost savings of next-day or regular processing ACH may be worth it for your organization in the long run.

To learn more about either ACH or RTP, follow the hyperlinks to our standalone guides on these payment systems. 

If you are interested in moving money with a dedicated API, we at Orum can help you speed up payments. To figure out the best options for your business, reach out to us here! We’d love to chat.