The bank makes electronic ACH entries for each paycheckĪCH operators at the bank sort payments to appropriate accountsĪCH payment shows up in employee’s bank account On payday, the employer sends an electronic payment file to the bank The process of receiving a direct deposit via ACH involves the following:Įmployee provides employer bank routing and account numberĮmployer enters this information into a payroll system This is a good scenario to explain how the ACH network works, since many Americans receive their paychecks via direct deposit. Perhaps the most well-known example of an ACH transaction is payroll direct deposit. We’ll also explain in this article what the differences are between ACH payments, EFT payments, and wire transfers. It’s taken some time to grow to what it is today, but as the world gets faster it’s clear that ACH is necessary. The Automated Clearing House was established in the 1970s to deal with an increasing number of paper checks that required processing. Deposits are a category that includes your paycheck coming via direct deposit. To simplify the issue, if you think of payments as the money taken out of your account when you have your monthly bills on autopay - that’s typically done via ACH. You might be wondering what is an ACH payment and how it differs from an ACH deposit, so we’re going to explain both here to eliminate any confusion.