ACH Transfer

ACH Transfer is an automated bank-to-bank payment method, which can be used for a variety of purposes including funding live trading accounts. This guide will explain how ACH Transfers work from payment speeds to security implications. We also cover the pros and cons of trading with the payment solution.

Brokers that accept ACH Transfer deposits include Binance and Interactive Brokers.

How ACH Transfers Works

ACH stands for Automated Clearing House and is a system used to transfer funds. The network of payments began with the Federal Reserve Bank of San Francisco in the 1970s, but it has now grown into a popular, multi-purpose system.

There are two types of ACH Transfer:

• Direct deposit
• Direct payment

Direct deposits are when funds are ‘pushed’ into an account, for example, government benefits or wages. Direct payments on the other hand, are when funds are ‘pulled’ from an account, with permission for funds to be withdrawn given through an ACH debit authorisation form. Importantly, transfers are processed in batches, which can impact payment timelines (more on that later).

When depositing to a live trading platform, money is taken out of your bank account and transferred to the broker’s account. If you don’t have sufficient funds in your account, the request may be rejected or declined, and you may still be charged a fee. Most companies use an ACH API (Application Programming Interface) to support payments.

Many large banks support ACH Transfers, including Bank of America, HSBC, Citibank, Capital One and Union Bank. It’s also not just banks that make use of the payment network – app providers like PayPal, Zelle and Venmo do too.

Transaction Times

So, how long do ACH Transfers take? Transactions typically take between one and several business days. Unfortunately this is longer than popular alternatives, such as wire transfers and debit cards, which usually offer instant processing. But while the batch nature of processing can lead to slow payment speeds, a tracking service is available. Same-day transfers are also available, though additional fees may apply.

It’s worth highlighting that three batches are normally processed each day. This means if you miss the last batch, your payment won’t be processed until the next business day. So miss the cut-off time on Friday and your funds may not move on weekends and will have to wait until Monday. This is why some brokers, like Binance, offer three to five business days for ACH Transfers.

Note, banks and brokers may also hold funds for a period following receipt, which can lengthen the overall time it takes to complete a transaction.

Pricing Review

Many ACH Transfers are free. With that said, some transactions incur a charge, particularly if you request that funds are allocated to a recipient’s account as soon as they are received by their bank. This could be a flat fee or a percentage cost, levied against the person that requests the payment. Importantly, fees are usually lower than wire transfers.

Banks may impose limits on the number of ACH transfers and the value of transactions in a particular month. Brokers may also impose their own minimum and maximum deposit and withdrawal amounts. It’s worth noting that NACHA (National Automated Clearing House Association) enforces a $100k limit on same-day ACH Transfers.

Security

ACH Transfers are generally safe and secure. Unlike wire transfers, the reversal of payments is usually available for a period after the transaction is made. And because wire transfers cannot be halted once initiated, they are considered less secure and open to fraud. Another important security benefit is that ACH Transfers ensure that bank account information is encrypted, protecting traders’ personal data.

ACH Transfers are also responsible for millions of transactions each year, adding a layer of trust. Nonetheless, traders should always use regulated banks with adequate insurance in case something goes wrong or errors are made.

Pros of ACH Transfer for Traders

Advantages of trading with ACH Transfers include:

• Low fees – Many brokers do not charge fees for ACH transfers, and for those that do, the fee is usually modest compared to wire transfers. With that said, some brokers may impose minimum withdrawal amounts alongside a payment charge.
• Secure – The ACH Transfer system is relatively secure, meaning high-tech bank account encryptions. Of course, the possibility of fraud is always a concern, so remain vigilant.

Cons of ACH Transfer for Traders

Downsides of trading with ACH Transfers include:

• Availability – Although similar ACH networks have been developed in many countries across the world, the transfer solution is primarily available in the US. This means traders in other regions may need to consider alternatives like PayPal.
• Time frames – Unlike wire transfers, which are quick and often take a matter of hours or even minutes, an ACH Transfer can take several business days (3-5 days typically). This is a real drawback, especially for active day traders and swing traders. Payments also aren’t processed on Saturdays.

How to Make ACH Transfer Deposits & Withdrawals

Here is a step-by-step guide to making deposits and withdrawals using ACH Transfer:

1. Open a live trading account with your chosen broker
2. Proceed to the Deposit section
3. Ensure you have the necessary funds in your bank account. A lack of funds will result in the transaction being declined and you may still incur fees. Brokers like Binance also have an additional requirement that traders must have 10% of their deposit amount left in their bank account, so check requirements before making a payment
4. Choose the amount you wish to deposit and input the details of the bank account to withdraw funds from. Additional verification checks may also need to be completed
5. Finally, check that the funds have been deposited in your live trading account

Note, many brokers require that you withdraw to the same account as you initiated the deposit from.

Accepted Countries

Although ACH is a US network, the logic behind the system has been replicated across the world, often under different names. For example, the UK equivalent to an ACH transfer is a BACS transfer. There is also an ACH equivalent covering participating countries elsewhere in Europe. But importantly, if you are trading in Jamaica, India, Canada, Hong Kong, the Philippines, Malaysia, Australia, Egypt, Singapore or Ghana, you will need to consider alternative options like PayPal.

Note, some traders in the USA can use the ACH system to transfer funds to other countries, for example, India. Also investment platforms like Revolut do not allow outbound international ACH transfers, though inbound ACH transfers are accepted.

Verdict

ACH Transfer is an excellent option for traders based in the US. It rivals the best electronic transfer methods and is particularly good for investors looking for security and reliability. The only major drawback is that it’s aimed at US customers, so traders elsewhere will need to use an alternative. Payment speeds are also relatively slow versus e-wallets and wire transfers.

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