Reference

ACH Glossary

Plain-language definitions for the payments terms you'll encounter. Bookmark this for the next time someone asks what an ODFI is.

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ACH: Automated Clearing House. The U.S. electronic network for moving money between bank accounts. Operated by the Federal Reserve and The Clearing House.
ACH credit: A push transaction. The originator instructs their bank to send funds to a recipient (e.g., payroll deposit).
ACH debit: A pull transaction. The originator instructs their bank to pull funds from a payer's account (e.g., utility bill auto-pay).
Authorization: A consumer's permission for a business to debit their account. Required by NACHA. Can be written, oral with confirmation, or electronic.

Bank verification: Confirming that a bank account exists, is open, and belongs to the person claiming it. Reduces returns and fraud.

CCD: Cash Concentration or Disbursement. ACH SEC code for business-to-business transactions.
Check 21: The Check Clearing for the 21st Century Act. Allows banks to process checks electronically using digital images.
Chargeback: A reversal of a card transaction initiated by the cardholder's bank. Different from an ACH return.

Direct debit: See ACH debit. The European term is more common internationally.

Effective entry date: The date the originator wants funds to settle. ACH transactions typically settle 1-2 business days after the effective date.
eCheck: An electronic representation of a paper check. Can be processed via ACH (using SEC codes like ARC, BOC, POP, RCK) or as a Check 21 image exchange.

IAT: International ACH Transaction. Used for cross-border transactions. Subject to OFAC screening requirements.
Idempotency: A property where the same operation can be safely retried without side effects. ACHQ's API uses idempotency keys on every write.

NACHA: The organization that governs the ACH network. Sets the rules, formats, and operating procedures.
NSF: Non-Sufficient Funds. ACH return code R01. The customer's account didn't have enough money.

ODFI: Originating Depository Financial Institution. The bank that submits ACH entries on behalf of an originator (the business).
OFAC: Office of Foreign Assets Control. Enforces U.S. sanctions. Originators must screen transactions against OFAC lists.
Originator: The party that initiates an ACH transaction. Usually a business collecting payments or sending payouts.

PPD: Prearranged Payment and Deposit. ACH SEC code for consumer transactions with written authorization.

RCC: Remotely Created Check. A check created by the payee using the payer's account information without a physical signature.
RDFI: Receiving Depository Financial Institution. The bank where the receiver of an ACH transaction holds their account.
Receiver: The party whose account is debited or credited in an ACH transaction. Usually the consumer or end customer.
Return: An ACH transaction that bounces back from the RDFI. Comes with a return code (R01, R02, etc.) explaining why.
RTP: Real-Time Payments. The Clearing House's instant payment rail. Different from ACH and Same-Day ACH.

Same-Day ACH: ACH transactions processed and settled within the same business day, with three settlement windows.
SEC code: Standard Entry Class code. Three-letter code (PPD, CCD, WEB, TEL, ARC, etc.) classifying the type and authorization of an ACH entry.
Settlement: The actual movement of funds between banks to fulfill an ACH transaction. Standard ACH settlement is 1-2 business days.

TEL: Telephone-Initiated Entry. ACH SEC code for transactions authorized over the phone.
Tokenization: Replacing sensitive account information with a non-sensitive token. Reduces PCI scope and fraud risk.
Trace number: A 15-digit identifier assigned to every ACH entry. Used to track transactions through the network.

WEB: Internet-Initiated Entry. ACH SEC code for transactions authorized via website or mobile app.

Apply for an ACHQ merchant account. Most applications approved in one business day.