The Difference Between ACH and a Debit Card Transaction

The debit card has been an alternative to checks for quite some time. It offers an easy way of transferring money electronically, from either a checking and savings account, and, if it carries a credit card logo, then it can be used for payments anywhere that credit card is accepted.

ACH works with direct debit payments, and it is an electronic payment system where funds are deduced automatically from the customer’s account. The acronym stands for Automatic Clearing House and it is the system is used by companies to set up recurring payments. A customer must consent to the transaction by submitting an order with an authorized Originating Depository Financial Institution. This institution then contacts the ACH, and the ACH in turn contacts a Receiving Depository Financial Institution.

The transfer itself can take up to a few days, but it is a good alternative to mailing a check. ACH money transfer is also used by employers to pay bills or to pay their employees on a regular basis. In order to authorize the payment, all a client or business owner has to do is pick up a phone or fill in information on a webpage.

Customer protection

Debit card fraud protection depends on how soon you notice that your account is being defrauded. If you can notify your bank within two days, you will be liable for only $50. However, if you notify the bank within 60 days, your liability can go as high as $500. After 60 days, some banks will hold you liable for the entire defrauded amount. There is also the possibility of your account being overdrawn while the bank is going through its investigation, which can take up to 10 days.

ACH on the other hand can be safer because any payment has to be authorized directly by the account owner. Banks will thoroughly scrutinize each payment application and it’s relatively harder for a fraudster to have their way with an account. However, if an unauthorized payment or an error does occur, the customer is protected by Regulation E of the Securities Act of 1933. The errors covered may include a transfer from or to the wrong account, problematic bookkeeping caused by the ACH transfer, or the disbursement of an incorrect sum from an ATM.

An ACH error can be disputed within 60 days of it appearing on a bank statement. The dispute can be initiated either orally or in writing, and in case the dispute has been initiated orally, the bank may require a written follow-up within 10 days. The bank may then take another 10 days to investigate, and an extra 3 days to notify you of the result. In some cases, the investigation may extend to 45 days, and if a bank determines that an error has occurred, the error must be corrected within 1 day.

For more information about the difference between an ACH and a debit card transaction, or to sign up for a merchant account, please call (888) 924-2743 or go to

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