Automated Clearing House (ACH) payments are a form of electronic funds transfer used in the United States. The National Automated Clearing House Association (Nacha) manages these transactions and sets the associated rules and standards. ACH payments typically take one to two working days to process, although same-day ACH transfers are becoming more widely available. Unlike electronic transfers, which are processed in real time, ACH transactions are processed in batches at specific intervals.

The ACH network is based and operates in the US, but ACH payments can be sent to other countries as well, including Canada. The trade relationship between the two countries is well established, with US goods and services traded with Canada totalling an estimated US$908.9 billion in 2022, thus creating high demand for convenient payment methods.

This guide will cover how ACH payments are used and how to send them from the US to Canada. Here's what you need to know.

What's in this article?

• What are ACH payments used for?
  
• Can you send ACH payments from the US to Canada?
  
• How to send ACH payments from the US to Canada
  
• Alternatives for transferring funds between the US and Canada
  

What are ACH payments used for?

ACH payments are a popular way for businesses, government agencies and individuals to transfer funds electronically. They're typically less expensive than electronic transfers or credit card payments, making them a natural choice for recurring payments or large-scale transactions. Here's how they're used:

• Direct deposits: Employers use ACH payments to deposit employee salaries and wages directly into their bank accounts.

• Government payments: ACH payments are also used for government agency payments, such as tax refunds and government benefit disbursement (e.g. Social Security, Medicare and unemployment).

• Healthcare payments: The healthcare sector uses ACH for processing insurance claims, paying providers and collecting payments from patients or insurers.

• Bill payments: ACH payments are used frequently to process recurring bill payments for utility bills, mortgage or rent payments, insurance premiums and other monthly expenses. These payments are often set up for automatic withdrawal from a bank account.

• Business-to-business (B2B) transactions: Companies often use ACH when making payments to vendors or other businesses. It offers a lower-cost alternative to cheques or electronic transfers.

• Online transactions: E-commerce platforms and other online services use ACH to process payments from customers. This can include one-off payments or subscription-based models.

• Interbank transactions: Banks and credit unions in the US use ACH for interbank transactions and other financial activities, such as loan disbursements. Customers often use ACH for automatic loan repayments as well.

• Tax payments: Individuals and businesses in the US can use ACH to pay federal or state taxes electronically. Estimated tax payments or business tax filings are commonly paid using ACH.

• Charitable donations: Non-profit organisations and charities use ACH for recurring donations from supporters.

• Educational payments: Schools, colleges and universities in the US use ACH for tuition payments, financial aid disbursements and other financial transactions.

Can you send ACH payments from the US to Canada?

Yes, you can send ACH payments from the US to Canada. This process is known as an International ACH Transfer. International ACH Transfers usually incur fees, which can vary between providers. They may also take longer to process than domestic ones – typically a few working days.

When sending an ACH payment from the US to Canada, funds are converted from US dollars to Canadian dollars and the exchange rate offered by the bank or transfer service will affect the final amount received. Not all banks facilitate International ACH Transfers and some banks may have limits on the amount that can be sent internationally via ACH.

How to send ACH payments from the US to Canada

First, anyone wishing to send an ACH payment from the US to Canada will need to find a bank or a specialised money transfer service (such as Wise or OFX) that offers International ACH Transfers, and they'll also need to assess the associated fees. Once they've found an appropriate bank or service, they'll need the following information about the Canadian recipient to initiate the payment:

• Full name

• Canadian bank account number

• Three-digit bank institution number

• Five-digit bank transit number

• Bank branch address

• A SWIFT/BIC code (if an intermediary bank is involved)

Alternatives for transferring funds between the US and Canada

Other common methods also exist to transfer money internationally, including between the US and Canada.

• Electronic transfers: Electronic transfers are a common method for international transactions. They are usually faster than ACH payments but come with higher fees.

• International money transfer services: Companies such as Western Union, MoneyGram, PayPal and others specialise in international money transfers. These services often offer more flexibility and come with more competitive fees compared with electronic transfers.

• Society for Worldwide Interbank Financial Telecommunication (SWIFT): This is a global network used by banks and financial institutions for international money transfers. It facilitates secure and reliable international transactions.