ACH Transaction Types and Lifecycle
Understanding ACH (Automated Clearing House) transactions is essential for accurate payment processing, regulatory compliance, and effective reconciliation. This article outlines the various ACH transaction types, their associated actions, and the complete lifecycle from initiation to funding or rejection.
ACH Transaction Types
Each ACH transaction is assigned a type that determines how it will be processed and what actions are allowed. Below are the common transaction types:
| Transaction Type | Name | Description |
|---|---|---|
| 20 | SALE | Charges the customer’s account. Funds are withdrawn and processed. |
| 21 | AUTH ONLY | Authorizes the payment but does not transfer funds. Requires a CAPTURE. |
| 22 | CAPTURE | Completes a previously authorized transaction (AUTH ONLY). |
| 23 | CREDIT | Refunds or sends funds to the customer’s account. |
| 24 | VOID | Cancels a transaction before it has been settled. |
| 25* | FORCE | Charges the customer without validation checks. Often used in emergencies. |
| 26* | VERIFY ONLY | Verifies account information without charging the customer. |
Transaction types 25 and 26 are only available if the merchant account has verification services enabled.
ACH Lifecycle Overview
The ACH process follows a 4-business-day cycle, not including weekends or bank holidays. Timing is crucial—transactions submitted after the daily cutoff will be processed on the next business day.
ACH Debit Lifecycle
Day 0 (Ready):
Transaction is submitted and marked as “Ready.” If submitted before the cutoff, this is the origination date.
Day 1 (Settling):
Funds are debited from the customer’s bank account.
Day 2 (Settling):
In transit through the ACH network.
Day 3 (Settling):
Continues processing within the system.
Day 4 (Funded):
Funds are released and sent to the merchant’s funding account by end of day.
Day 5 (Funded):
Merchant should see the funds deposited in their bank account.
ACH Credit Lifecycle
Day 0 (Ready – Funded):
Transaction is submitted and funds are debited from the merchant’s account.
Day 1–3 (Funded):
Funds are processed through the ACH system.
Day 4 (Funded):
Funds are delivered to the customer’s bank by end of day.
Day 5 (Funded):
Customer sees the credit in their account.
⏱ Bank holidays and weekends do not count as business days. Plan accordingly to avoid delays.
ACH Transaction Status Cycle
Understanding the status of a transaction helps monitor its progress and resolve any issues that may arise:
| Status | Meaning |
|---|---|
| Ready | Transaction is approved and ready to be processed. |
| Settling | Funds are being transferred (sent to the Receiving Depository Bank). |
| Funded | Transaction completed successfully and funds have been released. |
| Rejected | Transaction failed. The R code indicates the return reason from the bank. |
| Unfunded | Transaction was previously funded but has now been returned or disputed. |
Note: An approved ACH transaction means it’s eligible for origination—not necessarily that funds have been transferred. Only after the customer’s bank processes it will the transaction be marked as Funded or Rejected.
