ACH Codes: ACH Return Codes and their Meaning

The two kinds of financial institutions in the ACH network are ODFIs (Originating Depository Financial Institution) and RDFIs (Receiving Depository Financial Institutions). An ACH credit refers to the process of electronically depositing, or “pushing,” funds into a bank account using ACH. Returns in general have specific timeframes when they must be received depending on the return code. They also must include the same Accounting for Churches level of information as the original payment itself. Before you can take debit payments from a customer using ACH, you must obtain consent (authorization) in the proper way. This includes adhering to Nacha’s specific guidelines, and notifying your customer in advance of any changes to the payment schedule, range or payment amount.

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Despite implementing multiple safeguards, the potential for errors, unavailability of funds, or account closures without prior knowledge remains. By understanding these key aspects of ACH payments, businesses can effectively navigate such scenarios and safeguard against potential financial losses. Stax provides an all-in-one payment processing platform, designed with inclusive payment options (including ACH payments) for your customers. See how we can help you streamline payment processing, improve productivity, and help you build a better business.

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However, this method can incur a charge, so you may wish to set up balance checks only for new customer accounts. Whether or not using a balance check will be cost effective depends on your particular business. You’ll typically pay a fee for each ACH return, meaning a careless approach to ACH payments can result in increased costs at scale. But the main result of a failed ACH transfer is an ACH return – the originator receives a notification of failure, and funds go back to the bank they came from (if any funds were transferred).

• It’s easy to confuse a Notice of Change (NOC) and an ACH return, but these are two different things.
• This organization sets the rules, standards, and terminology for ACH payments, including the return codes.
• If an ACH payment can’t be completed, as mentioned above, a specific return code will be generated.
• Organizations looking to increase ACH offerings—or those seeing usage rates skyrocket—must take steps to secure their revenue and prevent fraud.
• The Originator, or the business using the ODFI for ACH, is also responsible for having the correct authorization from the Receiver.

Because ACH transactions do not process in real-time like a credit or debit card authorization, they can be returned or rejected after the transaction retained earnings is assumed complete. However, there are select ACH return codes that result in a 60-day return period. If for some reason the customer’s bank account alerts the ACH network that they are not able to complete the transaction, the money will remain in the customer’s account. NACHA prescribes separate rules for handling each return code since each one represents a unique scenario.

What are SEC codes?

Similar to transaction and surcharge processing fees, ACH returns come with additional fees as well. While these costs of ACH return fees differ depending on the specific ACH return code, they generally range from $2 – $5 and are often paid by the consumer. Reducing the risk of returns and fraud starts by following Nacha guidelines and leveraging new technology like instant account verification and IDV.

ACH returns: The bottom line

For example, a R01 return code indicates that the client’s bank account contains insufficient funds to complete the transfer. If a merchant wants to debit their customer’s or client’s account, the merchant’s bank (at the merchant’s request) will send a request for an ACH debit from the customer’s account. The customer’s relevant ACH network will then receive an ACH payment request. Then the merchant’s bank will debit the customer’s account and the merchant’s account will be credited with the amount of money indicated in the ACH payment request. In the world of ACH (Automated Clearing House) payments, errors, disputes, or unauthorized transactions can occasionally occur.