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Automated Clearing House (ACH) The electronic payment Network which exchanges funds via Electronic Funds Transfer (EFT) throughout the U.S. fifty states and territories and transfers funds between accounts. Over 98% of the nation's banks including the Federal Reserve belong to the ACH. From an originator viewpoint, ACH 'Inbound' transactions debit payor accounts and credit the originator (payee). ACH 'Outbound' transactions debit the originator accounts and credit the payee's account. ACH Associations Provide rules and guideline for the efficient operation
of the ACH Network. There are 36 regional ACH associations whose
memberships include financial institutions and affiliates. NACHA,
the National Automated Clearing House ACH Credit An ACH credit is issued to deposit funds. ACH Debit An ACH debit is issued against one account to withdraw funds. Acquiring Bank/Merchant Bank The bank that does business with merchants enabling them to accept credit cards. A merchant having an account with this bank deposits the value of the day's credit card sales on a daily basis. Acquirers buy (acquire) the merchant's sales slips and credit the tickets' value to the merchant's account. Acquiring Processor Provides credit card processing, billing, reporting and settlement, and operational services to acquiring banks. Many financial institutions don't do their own bankcard processing because it's more cost-effective to let the acquiring processor invest in the equipment and people and do it for them. Addenda Records Records that may be attached to certain ACH entries for the purpose of carrying additional information. Authorization Refers to the act of insuring that the cardholder has adequate funds available against their line of credit thereby resulting in an authorization of the ACH transaction by a consumer or company. Most authorizations must be in writing and must be retained for a period of two years. There are 3 types: recurring, non-recurring, one-time. A positive authorization results in an authorization code being generated and those funds being set aside. The cardholder's available credit limit is reduced by the authorized amount. The accumulation of captured (sale) transactions waiting to be settled. Multiple batches may be settled through the day. Converting the authorization amount into a billable transaction record within a Batch. Transactions cannot be captured unless previously authorized and the goods or services have been shipped or transmitted to the consumer. Cardholder Any person who opens a credit card account and makes purchases using a credit card. Cash Concentration Companies that have decentralized units use the ACH to concentrate cash into a centralized bank account - replaces wire transfer. Check Truncation Stopping or truncating a paper check by turning
it into an electronic item at the Point of Sale (POD) or in lockbox
check truncation. Business to business ASH Network collection and disbursement of funds. The Federal government is mandating this form of payment for corporate taxes and payments to government vendors. Credit The borrowing capacity of an individual or company or a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date. Opposite of debit. Credit Deposit The value of a merchant's credit card purchases that are credited to its bank account after the acquiring bank buys the merchant's sales slips. The deposit is credited but not funded until the acquiring bank gets the monetary value from the issuer during settlement. An accounting entry that results in either an increase in assets or a decrease in liabilities or net worth. Opposite of credit. Direct Deposit The disbursement of funds to consumer accounts. Includes payroll, interest, trust disbursements, expense payments, dividends, pension payments, etc. This is the most widely used ACH service. Direct Payment The collection of funds from consumer of business accounts. This normally would be used to collect payments for monthly dues as in: health club membership, rent, phone, utility bills, newspaper bills, trash collection, mortgage payments, lease payments, etc. Discount Rate The fee a merchant pays its acquiring bank/merchant bank for the privilege to deposit the value of each day's credit purchases. This fee is usually a small percentage of the purchase value. Electronic Funds Transfer (EFT) The transfer of funds from one bank account to another bank account utilizing the ACH Network. Electronic Check Re-presentment An ACH Network service that allows for the electronic re-presentment of a returned paper check marked non-sufficient funds (NSF). Provided that certain guidelines are fulfilled, the check can be collected electronically. The exchange of information, transaction data, and money among banks. Interchange systems are managed by Visa and MasterCard associations and are very standardized so banks and merchants worldwide can use them. Interchange Fee A fee paid by the acquiring bank/merchant bank to the issuing bank. This fee compensates the issuer for the time after settlement with the acquiring bank/merchant bank prior to it recouping the settlement value from the cardholder. Internet Initiated Entries - (WEB) A consumer authorizes a Receiver or Merchant to debit their account via the Internet. Issurer The issuing or cardholder bank that extends credit to customers through bankcard accounts. The bank issues the credit card, receives the cardholder's payment at the end of the billing period. Also called Accounts Receivable Truncation System (ARTS) is the process of turning checks received in the mail by a biller into electronic items. The National Automated Clearing House Association is the chief rules making and interpretation body of the ACH. NACHA is the cooperative governing body for 36 regional ACH associations. Notification of Change (NOC) An advice from an RDFI to an ODFI that entry information requires corrections and includes the correction details. Non-Recurring Payment Authorization An individual or company authorizes the debit of their account for a varying period and/or amount. Notification must be sent 10 days before the effective date with the amount to be debited. NSF Check A paper check that has been returned by the banking
system due to Non-Sufficient Funds. These can be electronically
represented through the ACH Network using Electronic Check Re-presentment.
Originating Depository Financial Institution (ODFI) The bank that initiates an Electronic funds transfer through the ACH Network on behalf of the Originator. One Time Payment Authorization An individual or company authorizes a one-time debit of their account. The authorization is usually a written authorization but in some instances a recorded telephonic authorization may be used. Originator An individual or a company that initiates an ACH transaction. Original Entry A debit or credit ACH transaction directed to an
account at an RDFI. A term used to describe an ACH transaction at the
time of purchase - for example at the supermarket check out counter. Or Pre-note is an ACH entry with no value that is sent to an RDFI to verify account information prior to sending a live entry. Refers to and represents the electronic check process for electronic re-presentment of paper NSF checks - Electronic Check Re-presentment. Recurring Payment Authorization An individual or company authorizes the periodic debit of their account for the same period and amount. Receiver The individual or company that holds an account to which an ACH entry is sent. Return Reason Codes Or, R Codes are rejections of original ACH entries by the RDFI. Receiving Depository financial Institution (RDFI) The financial institution that receives an ACH transaction for a holder of an account. Return Entry The return of an original entry that either could not be posted or was not able to be identified by the RDFI - closed account, NSF, wrong account number, etc. What occurs when the acquiring bank and the issuer exchange data or funds during the sales transaction that moves the value of the sales tickets from the merchant to the acquiring bank to the issuer whereby each party buys and sells the sales ticket. Telephone
Initiated Entry (TEL) Third Party Processor Any processor that participates in a relationship within the ACH processing flow - usually as an Originator of transactions for clients. Ticket Another name for the sales slip or its monetary value that results when a credit card purchase is made. Transaction The process that takes place when a cardholder makes a purchase with a credit card. Truncation In ACH, it normally refers to stopping or truncating
a paper check as in POS or lockbox check truncation and turning
that paper check into an electronic item. Internet Initiated Entries |