What Happens if an ACH Payment Is Returned?

Have you logged into your bank account and found your balance lower than you expected? If you look at your transaction history, you will find a list of money spent and received. A pending transaction is an ACH payment available within a few business days.

You see that payment is listed as pending because the ACH is still verifying that the sender has the money to be sent and that you, the receiver of the funds, are the correct customer. This is true whether or not you used over-the-phone or online ACH payment processing.

‍

Why Would an ACH Payment Be Returned?

ACH payments may get returned for several reasons, and returning payments is a key function of why the ACH system exists. ‘ACH’ stands for ‘Automated Clearing House,’ and a clearing house’s job is to guarantee payments between banks. When they can’t guarantee the payment, it will be returned. 

‍

Here are some key reasons ACH payments may be returned:

‍

Insufficient Funds

This is a way of saying the sender didn’t have enough money in their account. This is not to say the sender knowingly sent the payment without having enough money; errors occur for various reasons. 

‍

Perhaps the sender received payment from someone and thought they now had enough money to send, but the payment was still in the processing stages. As far as the bank is concerned, any transaction that isn’t confirmed doesn’t exist. Therefore, the ACH payment will be returned if the sender does not have enough confirmed funds in their account. 

‍

Incorrect Account Information

It could be that while writing down or typing out ACH transaction details, a bank account number was transposed, or a routing number was recorded incorrectly. The ACH system caught the error and returned the money to the sender. Similarly, both the sender and receiving so don’t if they believe there was an error. 

‍

Consequences of Returned ACH Payments

When an ACH payment is returned, the sender will be notified, and the money will be credited back into their account. However, the ACH system can take a few business days to send money, so don’t expect the money to instantaneously reappear in your account if you have an ACH payment that gets returned. 

‍

This might sound like all is well, but banks don’t like having to reverse payments. Because of this, banks may charge a fee for each returned ACH payment. This is typically a set dollar amount, though some financial institutions may institute the charge as a percentage of the amount returned. This may not be a large financial problem for a single returned ACH payment, but for a company that sends out direct deposits to all its employees, this can be an expensive headache.

‍

In Conclusion

In the end, your payment was returned may have cost a small fee, but the clearing house did its job by verifying each end of the transaction and canceling it before the money was sent erroneously. In the end, this saves everyone time, money, and trouble.