Automated Clearing House System (ACH)

An Automated Clearing House (ACH) system is an information transfer network that joins banks or other financial institutions together to facilitate the transfer of cash balances. An ACH system has a high initial fixed cost to install but requires a very low variable cost to process each transaction. The Federal Reserve operates the nationís primary ACH, which is owned by the member banks of the Federal Reserve System. Most banks are members of an ACH. Instead of transferring information about payments or receipts via paper documents like checks, an ACH transfers the information electronically via a computer.