ACH vs EFT in one table
| EFT | ACH | |
|---|---|---|
| Stands for | Electronic funds transfer | Automated Clearing House |
| What it is | A broad term for moving money electronically | One network that moves money between bank accounts |
| Includes | ACH payments, debit card payments, ATM transfers, point-of-sale transfers, phone transfers | Direct deposit, automatic bill payments, business-to-business bank payments |
| Defined by | Federal Regulation E | The Nacha Operating Rules |
| Uses | Depends on the type: a card, a terminal, or bank details | A routing number and an account number |
The short version: ACH is a kind of EFT, in the way a pickup is a kind of vehicle.
What EFT means
The legal definition is in Regulation E, the federal rule that protects consumers who use electronic payments. It says an electronic fund transfer is any transfer of funds that is initiated through an electronic terminal, telephone, computer or magnetic tape for the purpose of ordering, instructing or authorizing a financial institution to debit or credit a consumer’s account.
The regulation then lists five types.
| Type of EFT in Regulation E | Is it ACH? |
|---|---|
| Point-of-sale transfers | Usually not |
| ATM transfers | Usually not |
| Direct deposits or withdrawals of funds | Yes |
| Transfers initiated by telephone | Sometimes. A phone-authorized ACH debit is one example |
| Transfers resulting from debit card transactions | Usually not |
The official interpretation of the rule names “a transfer sent via ACH” as a covered transfer and gives Social Security direct deposit as the example.
One more case is worth knowing. When a company uses a paper check as a source of information to make a one-time electronic payment, that payment is an EFT. In ACH terms this is check conversion.
What ACH means
ACH stands for Automated Clearing House. It is the batch network that reaches all US bank and credit union accounts. Nacha writes its rules, and the Federal Reserve and The Clearing House operate it.
An ACH payment is always one of two things:
- an ACH credit, which pushes money into an account, such as direct deposit
- an ACH debit, which pulls money from an account with permission, such as an automatic bill payment
Our guide to what ACH is explains how a payment travels.
How the two fit together
- Every ACH payment to or from a personal account is an EFT under Regulation E.
- Not every EFT is an ACH payment. A debit card purchase is an EFT. So is cash from an ATM. Neither normally goes through the ACH network.
- A business-to-business ACH payment is electronic in the ordinary sense. It is outside Regulation E, because that rule covers consumer accounts only.
Why forms say “ACH/EFT”
You will see “ACH/EFT”, “EFT/ACH” or “EFT enrollment” on vendor forms, insurance claims and government payment forms. Such a form normally asks for the same four bank details that an ACH payment needs.
Two reasons explain the double name.
- Nacha itself notes that ACH payments are also known as direct debit, EFT, electronic bank transfer and eCheck.
- Some people know one term and some know the other, so forms print both.
So if a customer asks, “Do you take EFT?”, they usually mean, “Can I pay you from my bank account?” The answer is your ACH details. A one-page ACH information form gives them everything.
Is a wire transfer an EFT?
In plain English, a wire is electronic, so people call it an electronic transfer. In law it is treated differently.
Regulation E’s main rules do not cover wires. They exclude any transfer of funds through Fedwire or a similar wire transfer system that is used primarily for transfers between financial institutions or between businesses.
That matters to a consumer. The error and dispute rights in Regulation E apply to an ACH payment from a personal account. They do not apply to a domestic wire. An international wire sent by a consumer has separate, narrower rights under the remittance transfer rule. See ACH vs wire transfer.
Regulation E also leaves out a few other things, including payments by paper check and securities transfers.
ACH vs EFT vs wire
| ACH payment | Other EFTs (card, ATM) | Wire transfer | |
|---|---|---|---|
| Network | ACH Network | Card and ATM networks | Fedwire or a similar system |
| Speed | Same day to two business days | Approved at once | Usually the same business day (domestic) |
| Covered by Regulation E for personal accounts | Yes | Yes | No for domestic wires |
| Can be returned or disputed | Yes, in set cases | Yes, under Regulation E error rules | Final once processed |
| Details needed | Routing and account number | Card or PIN | Wire routing number or SWIFT code |
For more on the last column, read ACH vs wire transfer.
What protection comes with each
Personal accounts. Because ACH payments are EFTs, Regulation E gives a person these rights:
- A recurring debit needs a written or electronically signed authorization, and you get a copy.
- You can stop a recurring payment by telling your bank three business days before it is due.
- You can dispute an unauthorized transfer. Report it within 60 days of the statement that shows it.
See how to stop an ACH withdrawal and ACH disputes.
Business accounts. Regulation E does not apply. Under the Nacha rules, the business’s bank must return an unauthorized debit by the opening of business on the second banking day after it settled. A business should check its account every day.
Which word should you use?
- Setting up a payment with a bank or processor: say ACH. It is the exact name of the service, and it avoids confusion with cards and wires.
- Filling in someone else’s form: use whatever the form says. ACH/EFT, EFT and direct deposit all lead to the same bank details.
- Writing your own form or invoice: “Pay by ACH (bank transfer)” is clear to almost everyone.
Common mistakes
- Giving a debit card number on an EFT form. An ACH/EFT form wants your routing number and account number.
- Giving wire instructions for an ACH payment. Some banks use a different routing number for wires. Check an ACH number with the routing number checker.
- Assuming a business account has consumer protections. It does not have Regulation E rights.
- Thinking EFT means instant. An ACH/EFT payment still takes up to two business days unless it is sent as Same Day ACH.