Difference Between ACH and NEFT (With Table)

ACH and NEFT are both cashless, online payment systems used by many everyday. They are part of the digitization of the world, enabling banks to shift to newer methods of payment. They are used by financial institutions to make transferring money easier.

ACH vs NEFT

The main difference between ACH and NEFT is that NEFT transactions require the consent of the consumer each time payment is made. On the other hand, in ACH transactions, money can be debited from the client’s bank account without their taking approval each time.

ACH is a method of online payment where the bank uses automated transactions. The full form of ACH is Automated Clearing House. The consumer need not file for paperwork and or enter their details every time they want to make a transaction. It is based in the United States of America, and can be used only in the US and Puerto Rico.

NEFT is an online payment method that is based in India, and can be used only in India and Nepal. It allows consumers to transfer money between two different banks or bank accounts without physically visiting the bank. It is widely used by many banks.

Comparison Table Between ACH and NEFT

Parameters of ComparisonACHNEFT
RegionUsed in the USA and Puerto Rico only.Used in India and Nepal only.
ProcessFaster, because it has more automated and includes less work.Slower, as it needs permission of the client each time and has paper work.
SecurityA few agents will have access to the client’s bank details.It is technical and complicated, could be considered safe.
Transaction LimitAllows transfer of smaller funds to avoid mistakes.Does not have a lower or upper transaction limit, but per transaction the limit is 50,000 rupees.
Time TakenIt could take a few days for the transaction to be completed, around three to five business days.The transaction is completed in a few hours, sometimes even in just two hours.

What is ACH?

ACH (Automated Clearing House) is a method of direct payment, used to facilitate online transactions. They are a good alternative to cash and cheque payments. Even if you’re not aware of it, ACH system is used to facilitate your electronic payments.

What you need to do to use ACH is sign up for the automated payments with your bank and sign a recurring payment authorization form. The bank will handle the rest, sending money as long as you have enough funds in your account.

It is easier, convenient and cheaper because these transactions cost very little. ACH is applicable solely to checking accounts and savings accounts.

ACH is governed by NACHA, a government organisation that oversees and regulates ACH payments. It is mainly available in the United States as it is based there, but it can also be used in Puerto Rico. There are two types of ACH payments;

  • Debit transactions
  • Credit transactions.

Debit transactions include transferring money being transferred from your account, whereas credit transactions include money being transferred to other accounts.

What is NEFT?

NEFT, the Nation Electronic Fund Transfer, is a online money transfer method used widely to promote cashless transactions. It does not have a time limit, NEFT transactions can be processed 24×7, including on holidays. There is no limit on the number of transactions, but per transaction the maximum amount that can be transferred is 50,000 rupees.

To process a NEFT transaction, you will have to provide details such as your name, account number, IFSC code and type of account. You can make these transactions in the net banking option of your bank, available on the bank’s website. Receiving money requires no payment, but sending money will require a small fee that depends on the bank and transaction cost.

This method is simple, easy to use and does not require you to physically visit a bank. However, if you want to go through the bank or do not have a bank account, a NEFT transaction can be done offline as well. After the transaction is done, you will receive an SMS and e-mail that gives you a confirmation. NEFT only works with banks that are NEFT enabled, and this information is available on the RBI website.

Main Differences Between ACH and NEFT

  1. ACH is a service that provides automated transactions, whereas NEFT allows the consumer to transfer money between banks or bank accounts.
  2. ACH requires the client to sign up, and then the bank handles the recurring transactions on its own. NEFT requires the consumer to mandate the transaction each time.
  3. In NEFT transactions, repeated entering of details could cause security concerns. In ACH transactions, the service provider’s access to the consumer’s details could cause privacy concerns.
  4. ACH has transaction limits that allow only small amounts to be transferred, but NEFT has no limit on the number of transactions that can be made.
  5. RBI is the apex body for NEFT transactions as it is based in India. NACHA is the regulatory body for ACH transactions as it is based in the United States.
  6. ACH does not update the client about the transaction’s status. NEFT sends SMS and E-mails that inform the consumer of their transaction’s status.
  7. Time taken for the transaction to be processed is lesser in the case of NEFT transactions, and more for ACH transactions.
  8. Details need to be entered only once in ACH transactions, but they need to be entered each time in NEFT transactions.

Conclusion

Online methods of payment have been enabled by the digital revolution. This has alleviated the level of convenience in transferring money. Both ACH and NEFT are two systems that are a part of the online banking sector. They have their pros and cons, but they are more of a necessity in today’s world. Choosing one largely depends on which part of the world you live in. However, ACH is better for recurring transactions as it can be automated. NEFT is better for sporadical transactions.

References

  1. https://www.researchgate.net/profile/Satish-Bhosale-2/publication/261009679_Indian_Streams_Research_Journal/links/00b4953301b941a41d000000/Indian-Streams-Research-Journal.pdf
  2. https://mecs-press.org/ijieeb/ijieeb-v7-n4/IJIEEB-V7-N4-5.pdf