The Automated Clearing House is an electronic network that transfers funds between financial institutions and provides a more convenient and efficient payment method to move money seamlessly between accounts.

While ACH transactions consist of various payment types, such as direct deposits, direct payments, business payments, and person-to-person payments, you can categorize these payments into two groups: ACH pull payments and ACH push payments.

What is an ACH push payment?

Automated Clearing House push payments involve the payer initiating payment from their account and sending it to the recipient’s account. Push payments are typically used for peer-to-peer (P2P) payments or business payments.

The timing of ACH push payments may vary depending on the banks and the ACH processing schedule. However, the payer can initiate these payments instantly to promote faster transfers than other payment methods like paper checks or wire transfers.

What is an ACH pull payment?

ACH pull payments involve the recipient or payee initiating the payment request from the payer’s account.

With pull payments, the payer only needs to provide the payee with their bank account and routing information, and the payee can initiate future payments without requiring further authorization. The funds are deducted directly from the payer’s account on the designated payment due date.

ACH pull payments are common in automatic bill payments or direct debit transactions, where the merchant or service provider withdraws funds directly from the customer’s account based on the payment instructions provided.

While ACH push and pull payments share many similarities, there are some critical differences between the two.

What are the main differences between ACH push and pull payments?

In addition to their functionality, ACH push and pull payments differ in how they’re initiated, who verifies these payments, and how insufficient funds are handled.

Initiation

The main difference between ACH push vs pull payments is who initiates the payment and which party is responsible for verifying the payment information.

For push payments, the payer takes the initiative and provides their bank account and routing information to the payee. Whereas the payee or merchant initiates ACH pull payments.

Verification process

Another differentiator between ACH push vs pull payments is the process of verifying these transactions and the party responsible for verifying them.

For ACH push payments, the payee verifies the bank account and routing information by cross-referencing it with the payer’s bank to ensure the account is valid and has sufficient funds. Once the verification is complete, the payee can initiate the payment and transfer the funds from the payer’s account to their own.

When verifying ACH pull payments, the payee or merchant initiates the payment and sends a request to the payer’s bank for authorization. The bank then verifies the payer’s account information, including the account and routing number, to ensure it’s valid. Simultaneously, the payer’s bank checks for sufficient funds in the account. If all the verification steps are successful, the payment is approved, and the funds are deducted from the payer’s account.

Insufficient funds

Lastly, ACH push and pull payments vary in addressing insufficient funds and the consequences of this occurrence.

When conducting ACH push payments, if an account has insufficient funds, the payment will typically be rejected. Since the payer initiates the payment and the funds are transferred directly from their account to the payee’s, there’s immediate visibility of the available balance. If there aren’t enough funds in the account, the payment can’t be completed, and the payer will need to ensure they have sufficient funds before initiating the payment again.

In the case of ACH pull payments, if an account has insufficient funds, the payment request may be authorized initially, but the transaction will fail when the account is debited. This can result in an overdraft fee for the payer and potentially negatively impact their financial standing. The payee or merchant may need to follow up with the payer to collect the payment, leading to delays and potential issues in the business-customer relationship.

Understanding these differences between ACH push and pull payments is crucial for financial institutions and businesses.

Streamline your ACH payment process with EBizCharge

By understanding the distinction between ACH push and pull payments and utilizing the right tools and technologies, businesses can improve the customer experience, enhance cash flow management, and maintain strong customer relationships.

For a more seamless and efficient experience, businesses can use payment processors like EBizCharge to facilitate ACH payments and offer flexible payment options to customers. EBizCharge streamlines the payment process and reduces the likelihood of issues such as insufficient funds or late payments.