ACH Return Codes - NACHA Return Reason Codes

ACH Return Codes
Some times ACH transactions are rejected for few reasons, a returned code is returned to the users in case of failure of the transaction. Most of the bank charges some extra fee on failure of ACH transaction. There are around 60 ACH Return Codes; we are going to talk about some common ACH return reason codes, what it means and why it occurs. ACH transaction is processed through an ACH network in which the originating bank and receiving bank communicate electronically regarding the transaction. In this process the fund may move to the receiver’s bank account or in some case the transaction may be rejected. You can find the NACHA return reason code for a particular transaction listed on the Debit Voucher Report.

Below are few ACH Return Reason Codes (Click In The Image To Enlarge)

NACHA Standard Entry Class (SEC) Codes

NACHA requires that a transaction submitted to the Federal Reserve for processing must include something called a Standard Entry Class (SEC) Code to communicate exactly how the customer gave you authorization to debit/credit their bank account. There are only a few authorization methods allowed by NACHA, so this list of SEC Codes is very short. Below are some common Standard Entry Class (SEC) codes:

Consumer Applications

ARC - Accounts Receivable: This SEC code enables originators to convert checks received via U.S. mailbox location to Single-Entry ACH debits.

CIE - Customer Initiated: This code enables customer to initiate fund transfer, owed to a company, typically from a self-service banking terminal, for example, an automated teller machine, or bill payment service provider.

MTE - Machine Transfer Entry: Fund transfer through automated teller machines (ATM) supports ACH Network for clearing the transactions.

PBR - Consumer Cross Border Payment: Used for international household transactions. For example, foreign exchange conversion, origination and destination currency, country codes, etc.

POP – Point of Purchase: A check presented by the originator to a merchant for purchasing a goods or service, is presented as an ACH debit rather than a physical check.

PPD - Prearranged Payment and Deposit: This SEC code is used to credit or debit a consumer account. Generally used for payroll direct deposits and preauthorize bill payments.

POS - Point of Sale: Swapping of debit or credit card from a network, where a sales transaction occurs.

RCK - Re-presented Check: A physical check that is presented but returned due to insufficient fund in the account holder, this may represent as an ACH entry.

TEL - Telephone-Initiated: This SEC code enables a single entry debit transaction to a consumers account through an oral authorization made by a phone call.

WEB - Internet-Initiated Entry: This SEC code entry enables payment authorization is obtained from the customer via the Internet.

Corporate Applications

CBR - Corporate Cross-Border Payment: This SEC code entry is used for international business transaction. Basically these are used by giant corporate.

CCD - Corporate Credit or Debit: This SEC code entry is used for business-to-business transactions.

CTX - Corporate Trade Exchange: A fund transfer system used by corporate and government institution, to pay trading partners via the automated clearing house (ACH) system. This type of fund transfer allows payment to several parties with a single fund transfer.

ACH Transfer| ACH Credit | What is ACH?

ACH transfer is one of the easiest and quickest ways to transfer money throughout the world. If you are looking for an urgent business payment, ACH transfer is the best way to transfer fund. You can transfer money to every part of the globe without visiting your bank to initiate the transfer.

If you visit a bank to transfer fund you need to stand in a queue in order to initiate a fund transfer. ACH transfer is one of the best ways to transfer money because you can initiate a transfer at your own convenience from home or anywhere else that is convenient for you. All you need to initiate the transfer is a computer with a basic internet connection and an ACH account with a bank or a reputed financial organization.

To transfer fund from your bank account you need to initiate ACH transfer from your online ACH account and request the bank to perform an ACH debit of the amount you want transfer and credit it to the intended receiver’s bank account.

ACH transfer is one of the oldest ways to transfer money since 1970’s and it works as a mediator to transfer money. Generally ACH processing software require 42 to 72 hour to be completed because ACH transaction are done in bulk batch files and the bank will only activate automated clearing house transfer at a fixed a date.

Most of the bank will charge a fee to transfer fund by means ACH transfer, the fee is quite cheaper compare to wire transfer.

Advantage of Automated Clearing House & ACH Payment

The Automated Clearing House (ACH) is an electronic network system that helps banks and other commercial institutions to clear electronic payments efficiently. The network operated by the rules and regulations developed by the National Automated Clearing House Association (NACHA). Below are few benefits and advantages of ACH processing:

Get Rid of Paper Checks for Routine Payments
An a/c holder of a bank has to clear his debts on monthly basis or on a specific period of time. Previously he had to issue checks for this proposal. This was tough for the customer as well as for the banker. For processing the paper checks it take lot of time. The a/c holder needs to pay some charges if he issue checks after the due date. Even the bank had to spend some money on petty expenses like postal charges, etc. With the invention of Automated Clearing House (ACH) you can make all the transaction online. All you need to do for the whole process is to send an authorization letter to the bank.

Encourages Financial Management and Facilitates Investment
Automated Clearing House (ACH) is one of the easiest ways to maintain proper financial management and control. If an a/c holder is not having the facilities of an Automated Clearing House he may not have any control over his spending. This system transfers your fund automatically on a specific date. As a result reserved funds are kept for your savings and investment.

Minimize Paperless Operations in Banks
Without Automated Clearing House (ACH) private and public sector banks need to maintain ledgers and other books of a/c to enter all the transaction made in the bank. The banks need to maintain many books of a/c and also need to audit them regularly. By the help of Automated Clearing House (ACH) banks are relieved from all these formalities. This ACH process saves time and money but also error free transactions are made.

Is ACH Right for You?
This option can be selected only if you need to keep some fund reserved for saving or investment for any other purpose. If the fund is not available in you’re a/c during the due date the bankers will impose fine as a penalty. Consequently if you are not sure that you can maintain the fund during the due date, in such case you will need to select the traditional payment method to make sure that you are not at a loss.

What is Automated Clearing House (ACH) | ACH Network | ACH Software

The Automated Clearing House (ACH) is an electronic network which facilitates electronic fund transfers in between various nationalized banks within the United States of America. Rules and regulations of the ACH network is governed by NACHA (National Automated Clearinghouse Association). The network system is extremely efficient and reliable. ACH Software processes bulk quantity of debit and credit transactions in one set.

The ACH network system allows funds electronically debited or credited to a business or personal deposit account. Presently these deposit accounts include checking and savings accounts. During September 2000, ACH credit transactions can be deliver to loan a/c’s and ACH Dr and Cr transactions to Companies general ledger accounts. Automated Clearing House transactions import simple basic information such as the person name (excluding Point-of-Purchase transactions), financial institutes routing number, a/c number, price and the actual date of the transaction. Additional payment information is known as addenda records. The addenda possibly include payment-related details including shipping information or invoice number.

How does Automated Clearing House (ACH) Work?

1. An organization or a person (Receiver) appoints an organization or a person (Originator) to start a transaction to their financial establishment account.
2. The Originator prepares report about the transactions that are to be automated for its buyers or workers and push it to an Originating Depository Financial Institution (ODFI).
3. The Originating Depository Financial Institution (ODFI) compiles the Automated Clearing House (ACH) transactions from different organizations, consolidates the report and submits it to the ACH service provider.
4. ACH service provider processes transaction files by submitting it to Originating Depository Financial Institutions (ODFIs) and transfer it to Receiving Depository Financial Institutions (RDFIs).
5. The RDFI gets entries for its customer accounts and transfers entries on the due date. Transactions are also presented on the account statements.

ACH Flow Diagram: