Difference Between ACH and Direct Debit (With Table)

Financial Management is a regular practice in a day to day life in a  business environment. It refers to Strategic planning, organizing, directing, and controlling of the business entities. Financial management includes the payments and fund transfer also.

The methods of payment are up to the individual, it is on his choice the payment is done. Direct debit and Automated Clearing House (ACH) are the method of payment, which will help the individual as well as the organization to run the business without any payment hassles.

ACH vs Direct Debit

The difference between ACH and Direct debit is ACH includes Direct debit and direct credit, where funds are deposited as well as withdrawn from the account. While Direct debit payment is one of the categories in the ACH, where funds are used to make payments either by an individual or an organization.

The bank to bank funds transfer through electronic means happens with the help of ACH payment. The transfer is made through the network of ACH instead of other payment networks. Thus the names ACH transaction or ACH payment came into existence. ACH network is available for quite a long period in the US.

A provider of electronic funds transfer services in the United States, handling automated payments such as direct debit and direct credit. Direct debit is one of the main categories in ACH payments.

Direct debit is a payment method in where the account holder granted permission to take payments from a bank account to pay a fixed amount (Mortgage loans or rent) or variable amount (utility bills and other) directly to the bank or supplier.


Comparison Table Between ACH and Direct Debit (in Tabular Form)

Parameter of ComparisonAutomated Clearing HouseDirect Debit
MeaningIt is a network of financial institution used for the payment in the USIt is one of the main methods under ACH and used for payment
UsageACH is an electronic clearing and settlement system, transactions carried out electronically between two financial institutionsAccount holder grants permission to the bank to pay a fixed amount directly to another party for their services
Functional BaseACH includes both Direct Debit and Direct credit. Where a fund is pulled out from an account and pushed into an account.Direct debit payment uses the of the account holder to make payment to the other party
ActivityBoth the Direct debit payment and direct creditOnly debit from an account to make payment or transfer
Time FactorCompare to other methods slowCompare to other methods slow but convenient.


What is Automated Clearing House?

Automated Clearing House (ACH) is a payment method which allows transaction between the banks of the US through its network. It is operated by NACHA and also called an ACH scheme or network.

All the credit and debit transactions are facilitated electronically through ACH. Both the public and private sector is benefitted by this network. In simple words, ACH helps to transfer funds from one party to another electronically, from one bank to another or the same bank as well.

ACH money transfer takes one business day or more to complete the transaction. The ACH payment process is done together instead of handling it individually. Though the transactions have its timeline, certain ACH transactions may happen the same day as well.

ACH credits and debits are the two main types of ACH transfers. ACH credit is the funds is the process where an account receives funds from another account whereas ACH debit is the process where funds are transferred or paid to another account.

Using ACH process payments brings significant benefits to the customer such as Low cost, High retention, and Open to anyone who has a bank account in the US. ACH is considered a bit slow when compared to other transfer modes, but it is widely accepted because of its cost factor.

ACH transfers are also quite safe, but either of transfer, payee needs to provide information about bank account number, name, and other. Those details can be used to steal funds from the account and fraudulent transfer our of account.


What is Direct Debit?

Direct Debit is a method to make payments utilizing funds as the commodity, between individuals or organizations. It is one of the main methods under ACH, where the funds are transferred to another bank, supplier, or party for their services.

Direct Debit is facilitated through a customer’s bank account upon his instructions and initiations. The direct debit is done through payment networks such as the ACH.

Direct Debit payments are considered the safest and versatile mode for any type of payment. ACH network which has more than ten thousand financial institutions connected helps in Direct Debit payment as well.

Card payments are faster compared to direct debit. The direct comparison between card payment and direct debit is, card payment can happen maximum in a day or two but direct debit can also take 5 days.

The benefits of direct debit are many, however, keeping track of every transaction is made easy through direct debit. Direct Debit is the simplest and most convenient way for you to pay regular and utility bills. ​​​

The debit card payment and direct debit work more or less the same way. The only difference is that with direct debit requires a routing number and account number while debit card requires the customers to type the card number.

Direct Debit is the most common mode of fund transactions in the world. It is considered to be the safest and convenient mode of transaction which is also cost-effective.

Main Differences Between ACH and Direct Debit

  1. The main difference between ACH and Direct debit is, ACH is a network through which both Direct debit and direct credit happens, where funds are deposited into an account and withdrawn from an account. Whereas Direct debit is one of the main methods under the ACH that uses funds for transfer, to make a payment by an Individual or Organization.
  2.  ACH is a network used electronically to transfer funds in a financial institution. Whereas Direct Debit payment is done through the ACH network
  3.  ACH network is used only in US banks. Whereas Direct debit payment used different countries with a different network.
  4.  ACH is faster in the network coordination while Direct debit payment is slower compared to the other transactions method but it is convenient as no chances of missing any bills.
  5. ACH network is always safe, however, Direct Debit at times may deduct more amount and the information on the same shall be shared late to the customer.



The safest way to pay is through the ACH network. ACH is safe when compared to a transaction using cheques.  Cheques at times can be lost and it requires a lot of manual intervention to have the cheque cleared, while ACH transactions make it convenient.  The recurring bill payment set up need not have any watch for it as it happens automatically on the mentioned dates.

Paper free banking services are the best mode of transactions, like EFT and RTGS. ACH is the pioneer of electronic funds transfer, that helps in payments. And it is slower compared to the other methods of services. ACH payment generally needs a U.S. bank account, which requires that they provide enough identification for law enforcement to find them if the need arises.


  1. http://www.medien.ifi.lmu.de/lehre/ws0910/mmn/mmn7.pdf
  2. https://ieeexplore.ieee.org/abstract/document/570823/
  3. https://fraser.stlouisfed.org/files/docs/publications/frbclevreview/pages/1995-1999/68731_1995-1999.pdf
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