About Electronicpayments.org : Individual : Glossary

For your convenience, we have provided definitions of terms and acronyms you may encounter. Select the first letter of the word you wish to define to jump to the corresponding section of the glossary.

A | B | C | D | E | F | G | M | N | O | P | R | S | T | W

- A -

ACH - Automated Clearing House

The Automated Clearing House (ACH) Network refers to the batch processing, store-and-forward system that enables electronic funds processing. Transactions received by a financial institution during the day are stored and processed later in a batch mode. Rather than sending each payment separately, ACH transactions are accumulated and sorted by destination for transmission during a predetermined time. Instead of using paper to carry necessary transaction information, ACH transactions are transmitted electronically between financial institutions.

ACH Credits

ACH credit entries occur when an Originator initiates a transfer to move funds into a Receiver's account. For example, when an employer offers Direct Deposit, the employer originates the payment through the ODFI, which then initiates the credit transaction to transfer the money into the consumer/employee's account; the consumer is the Receiver.

ACH Debits

In an ACH debit transaction, funds are collected from a Receiver's account and transferred to an Originator's account, even though the Originator initiated the entry. For example, consumers authorize a cable access company to debit their accounts for their monthly bills. Once a month the cable access company initiates a debit file through its ODFI to withdraw the money from the consumers' accounts. The cable company is the Originator, and the consumers are the Receivers.

ARC - Accounts Receivable Entry

This Standard Entry Class Code enables Originators to convert to a Single-Entry ACH debit a consumer check received via the U.S. mail or at a dropbox location for the payment of goods or services. The consumer's check is used to collect the consumer's routing number, account number, check serial number, and dollar amount for the transaction. As of September 15, 2006, eligible checks drawn on corporate or business accounts may also be converted to ARC entries.

Authorization

A written agreement with the originating company signed or similarly authenticated by an employee or customer to allow payments processed through the ACH Network to be deposited in or withdrawn from his or her account at a financial institution. It can also be a written agreement that defines the terms, conditions and legal relationship between trading partners. For ACH credit entries, authorization may also be by verbal or other non-written means.

- B -

Banking Day

Any day on which a participating depository financial institution is open to the public during any part of the day for carrying on substantially all its banking functions.

BOC - Back Office Conversion

This is the standard entry class code for checks that are written at a payment location for goods or services, and converted from paper to electronic debit later at a centralized location. The consumer's check is used to collect the consumer's routing number, account number, check serial number, and dollar amount for the transaction. (Effective March 16, 2007)

- C -

Consumer Account

A deposit account held by a financial institution and established by a natural person primarily for personal, family, or household use and not for commercial purposes.

Corporate to Corporate Payments

Any of the class of automated payment formats developed for the ACH Network that allows concurrent exchange of funds and remittance information between trading partners.

Credit Entry

An entry to the record of an account to represent the transfer or placement of funds into the account.

- D -

Data Transmission

The electronic exchange of information between two data processing points.

Debit Entry

An entry to the record of an account to represent the transfer or removal of funds from the account.

Direct Debit

See Direct Payment.

Direct Deposit

An ACH service that provides for the electronic transfer of funds directly into the account of a payee, usually an employee receiving pay or a Social Security beneficiary receiving retirement benefits.

Direct Payment

A method of collection used in the ACH Network for certain claims, generally those that are repeated over a period of time, for which the debtor gives the Originator an authorization to debit his or her account.

- E -

Effective Entry Date

The date the originating company expects payment to take place. The ACH Operator reads the effective entry date to determine the settlement date.

Entry

An electronic item representing the transfer of funds in the ACH.

- F -

Funds Availability

The time at which the funds resulting from a funds transfer are made available to the customer.

- G -

Green Book

A publication assembled by the U.S. Department of the Treasury that specifies the procedures to be used in Automated Clearing House transactions originated on behalf of the United States Federal Government.

- M -

MICR Line

The magnetic ink character recognition inscription at the bottom of a paper check. The MICR line typically contains the routing number of the drawee bank or credit union, the account number, and the check serial number.

- N -

NACHA - National Automated Clearing House Association

The national association that establishes the standards, rules, and procedures that enable depository financial institutions to exchange payments on a national basis.

NACHA Formats

The ACH record format specifications described in the NACHA Operating Rules and Guidelines are the accepted and warranted payment format standards for payments delivered through the ACH.

- O -

Originator

Any individual, corporation, or other entity that initiates entries into the ACH Network, according to an arrangement with a Receiver. The Originator is usually a company directing a transfer of funds to or from a consumer's or another company's account. In the case of a Customer Initiated Entry (CIE), the Originator may be an individual initiating funds transfer activity from his or her own account.

- P -

POP - Point-of-Purchase Entry

This ACH debit application is used by Originators as a method of payment for the in-person purchase of goods or services by consumers. These single-entry debit entries are initiated by the Originator based on a written authorization and account information drawn from the source document (a check) obtained from the consumer at the point-of-purchase, which is then voided by the merchant and returned to the consumer, also at the point-of-purchase. As of September 15, 2006, eligible checks drawn on corporate or business accounts may also be converted to POP entries.

Posting

The process of recording debits and credits to individual account balances.

Prenotification

A non-dollar entry that may be sent through the ACH Network by an Originator to alert an RDFI that a live-dollar transaction will be forthcoming and that verification of the Receiver's account number is required.

- R -

Receiver

An individual, corporation, or other entity who has authorized an originator to initiate a credit or debit entry to an account held at an RDFI.

Regulation E

A regulation promulgated by the Federal Reserve Board of Governors in order to ensure consumers of a minimum level of protection in disputes arising from electronic funds transfers.

Return

Any ACH entry that has been returned to the ODFI by the RDFI or by the ACH Operator because it cannot be processed. The reason for each return is included with the return in the form of a "return reason code."

Reversal

Any ACH entries or files sent within required deadlines to "correct" or reverse previously originated erroneous entries or files.

Routing Number

A nine digit number (eight digits and a check digit) that identifies a specific financial institution. Also referred to as the ABA number or Routing/Transit number.

- S -

Settlement

A transfer of funds between two parties in cash, or on the books of a mutual depository institution, to complete one or more prior transactions, made subject to final accounting. Settlement for the ACH Network usually occurs through the Federal Reserve.

Settlement Date

The date on which an exchange of funds with respect to an entry is reflected on the books of the Federal Reserve Bank(s).

Standard Entry Class Codes

Three character code within an ACH Company/Batch Header record that identifies payment types within an ACH batch (e.g., CCD, CTX, etc.).

- T -

TEL - Telephone-Initiated Entry

This SEC Code is used for the origination of a single entry debit transaction to a consumer's account pursuant to an oral authorization obtained from the consumer via the telephone. This type of transaction may only be originated when there is either an existing relationship between the Originator and the Receiver, or no existing relationship between the Originator and the Receiver, but the Receiver has initiated the telephone call.

Transaction Code

The two-digit code in the ACH record that determines whether an entry is a debit or a credit to a DDA account, savings account, or general ledger account, or whether an entry is a credit to a loan account.

- W -

WEB - Internet-Initiated Entry

This SEC Code is used for the origination of debit entries (either recurring or single entry) to a consumer's account pursuant to an authorization that is obtained from the Receiver via the Internet. This SEC Code addresses unique risk issues inherent to Internet payment through requirements for added security procedures and obligations.