Same Day ACH Transfers

Welcome to another payments guide from Orum, where we’re all about money movement

In 2021,  the number of completed Same Day ACH transactions grew by 74% from the year prior to 604 million completed transactions

Yet despite its popularity, Same Day ACH is still lagging behind other currently available payment methods. In fact, many consumers and businesses don’t utilize Same Day ACH for their transactions or even know that it exists.

Today let’s take a look at why that might be and answer the following questions: 

  • What Is Same Day ACH?
  • How Is Same Day ACH Related To Other ACH Payments?
  • How Do Same Day ACH Transfers Work?
  • What Is The Impact Of Same Day ACH Payments?
  • When Should Same Day ACH Be Used?
  • Why Would You Choose Same Day ACH?

 

What Is Same Day ACH?

Same Day ACH is an electronic payment method for domestic transactions in the U.S.

This payment method was introduced in March 2018 as an extension of the -existing ACH payment service. That expansion was the result of joint working groups of financial institutions,  NACHA and industry experts as  part of the larger efforts of the Federal Reserve’s Faster Payments Task Force to modernize US payment systems.

 

How Is Same Day ACH Related To Other ACH Payments?

As suggested by its name, Same Day ACH is not a fully separate payment service, but rather an extension of the larger Automated Clearing House (ACH) network.

Since ACH was originally introduced more than 50 years ago, there was a growing demand for faster payments  especially with the growing ubiquity of online transactions for both businesses and consumers. Payments took between 3 and 5 business days to complete, lagging behind consumer expectations and not accommodating for evolving  use cases.

The ACH network as a whole has had a variety of improvements and now these payments have two speed options:

  • Same Day ACH
  • Next Day ACH

Same Day ACH is the fastest of those options, allowing businesses and consumers to send money and have that payment processed and settled within the same working day. 

However, all payments are processed essentially the same way. 

A financial institution sends instructions to another bank about moving a specific amount of money. All instructions have to follow the standards set forward by ACH’s governing organization, Nacha. Then the instructions go to the Federal Reserve, to settle such instructions by moving funds between master accounts of the financial institutions. 

Let’s dive into why that is. 

 

How Do Same Day ACH Transfers Work?

Even though Same Day ACH payments can be quite fast, they are not instantaneous. .

All ACH payments are cleared and settled in batches and have been since the initial introduction of the ACH network. The improvement in speed comes from the introduction of additional settlement windows during each working day.

With new settlement windows, transactions are processed more frequently and faster. These additional times benefit all ACH payments, but Same Day ACH transactions are processed even faster as they are prioritized within that working day and the next available settlement window.

 

Same Day ACH Fees

Same Day ACH fees are much less when compared to wire transfers or card payments.

On  top of the normal ACH fees, which you can read about in our general ACH guide, there is an additional “Same Day Entry Fee” which can be up to $.10 – $.15 more than standard ACH.

As such, Same Day ACH payments are a bit more expensive than slower ACH transactions. But even with that additional fee, Same Day ACH is still significantly cheaper than many other available payment methods. 

 

Same Day ACH Processing Times

There are currently 3 settlement windows per business day depending on when or how exactly a transaction is posted. Those settlement windows are:

  • 1:00 pm EST
  • 5:00 pm EST
  • 6:00 pm EST.

 

Same Day ACH Limits

Same Day ACH can only be used with certain types of transactions depending on their type and the amount sent.

Same Day ACH works with both ACH Credit and ACH Debit transactions. You can find more information on these two types of payments and how they are used in our ACH guide here. However, only domestic transactions are eligible for same day processing.

Same Day ACH also only works with transactions under a certain value. Since March 2022, this payment type is available for transactions under $1,000,000 in value. Any payments larger than $1,000,000 in value are processed as Next Day ACH instead. 

 

What Is The Impact Of Same Day ACH Payments?

Even with the original $25,000 limit per transaction, Nacha claimed that around 99% of the ACH network volume was made up of payments eligible for Same Day ACH processing.

Despite that wide-reaching eligibility, one important limitation is that Same Day ACH transfers are not instant and not even necessarily same day. Certain payments are not eligible at all and other eligible payments cannot be processed within the same day depending on when they were sent. The ACH network functions only on business days, so a transaction may not be processed immediately if it’s sent:

  • After the last settlement window of that day
  • On a weekend 
  • During a national or banking holiday.

However, the introduction of additional settlement windows during business days does significantly improve the speed of processing for all ACH transactions, and Same Day ACH payments can be settled nearly in real time when sent during working hours.

 

When Should Same Day ACH Be Used?

Nacha states that their research found 63 different use cases for Same Day ACH. 

However, the 10 main use cases that they explain are as follows:

  1. Payroll
  2. Urgent claims payments and refunds
  3. Invoice and tax payments
  4. Person-to-Person (P2P) transfers
  5. Account-to-Account (A2A) transfers
  6. Bill payments
  7. Online purchases of goods and services
  8. Point-of-Sale (POS) check conversions
  9. Collection payments
  10. Merchant debit payments

 

Why Would You Choose Same Day ACH?

Same Day ACH transfers maintain most of the benefits associated with the larger ACH network. These benefits are:

  • Ubiquitous and supported by all financial institutions in the U.S. 
  • Cheaper than wire transfers or card payments
  • Secure

While Same Day ACH transfers are not real time as are RTP payments network or the upcoming FedNow service, Same Day ACH still provides businesses and consumers with most of the practical benefits of real time transfers.

Speed provides organizations and individuals with flexibility. Same Day ACH can be used for urgent payments to cover bills or avoid late payment penalties, to control cash flow, and/or to cover outstanding obligations faster.

 

In conclusion, Same Day ACH combines the ability to send money quickly while still saving a lot of money on processing fees.

If you’d like to learn more about ACH, you can read our ultimate guide to that payment system here. And if you’d like to learn more about Orum and how we can help you speed up and orchestrate payments, reach out here! We’d love to chat.