As Automated Clearing House (ACH) payments become more common, more merchants and their clients choose ACH transactions. The popularity of ACH has led to more austere measures and rules to protect customers from losing money during online ACH payment processing.
One of those rules relates to retrying failed ACH payments, which you’re allowed to do. How many times can a company retry an ACH payment? According to ACH network rules, you have two more chances to collect your payment. The validity of the authorization determines this.
So, the other important question you have to address is: How long is an ACH authorization valid? Once you understand this, you’ll know when to retry your rejected ACH payments. This article explains why, how, and when to retry an ACH payment.
Why Your ACH Payment May Be Rejected
First, understand that ACH transactions are more like physical checks, which aren’t approved immediately. This is also the main difference between ACH payment and wire transfer–your ACH payments can be rejected just like bounced checks.
Unfortunately, this rejection can leave you with expensive write-offs if you don’t act immediately. The ACH network you use to debit your client’s bank account will provide you with a status code when a payment has been rejected.
Therefore, you should understand why your payment has been rejected and take the appropriate action to collect your funds as soon as possible.
Here are the main reasons why your ACH payment may be rejected.
R01: Insufficient Funds
This is the code your ACH network will send you if your client’s bank account doesn’t have sufficient funds to complete the transaction. When this happens, you can retry the payment two more times within one month of the initial ACH authorization.
With an ACH payment processing platform like Seamless Chex, you can configure your bank account to retry automatically rejected payments without violating ACH resubmission rules. Alternatively, you can agree with your client on the appropriate date of re-submission of payment. You can even ask them to send you the funds through other forms of payment, especially if you need the funds urgently.
R02: Bank Account Closed
This payment rejection code means the bank account you’re trying to debit has been closed. Unfortunately, this also implies you can’t clear the current and future payments using this account. The only solution is to contact your client and request them to send you the funds through another payment method or link the ACH payment to their latest bank account.
R03: No Bank Account
Your ACH will be rejected if your ACH payment processor can’t locate your client’s bank account. This can happen when you enter the wrong routing number or bank account number of your client. It also occurs when the routing number you enter fails to match the provided bank account or the customer’s details.
Sometimes, this may be caused by a simple, innocent typo or deliberate misinformation by your client. This is why you should double-check your client’s bank details and routing number before you initiate an ACH payment. In addition, it’s advisable to contact your client to confirm the payment details before processing the payment.
R20: Non-Transaction Account
This payment rejection code means the bank account won’t accept ACH payments. You can ask your client to set up a new bank account that accepts ACH payments.
ACH rules stipulate that when you request an ACH payment from your client’s bank account and your payment is rejected due to insufficient or uncollected funds, you can retry the payment two more times. But you have to retry this payment within 180 days from the settlement date of the initial entry.
Lastly, if you’re looking for a reputable ACH processing partner for your business, try Seamless Chex. Here, you can send and receive ACH payments through email or text!
FAQs
ACH rules stipulate that when you request an ACH payment from your client's bank account and your payment is rejected due to insufficient or uncollected funds, you can retry the payment two more times. But you have to retry this payment within 180 days from the settlement date of the initial entry.
How many times can an ACH be returned? ›
Limits on ACH Payment Retries
NACHA Guidelines: Generally, NACHA suggests that companies can try three times to withdraw funds through ACH. But, different banks might have their own rules, so it's crucial to know the specific guidelines of the company's bank.
What happens if an ACH payment is rejected? ›
Your bank will reject the ACH payment if you entered incorrect payment information. Log into your account and submit your payment again with the correct information. If the payment is returned for insufficient funds in the account, the department will charge a non-sufficient funds fee.
What happens if an ACH transfer fails? ›
When the receiving bank returns an ACH origination, we will reverse the funds in/out of your account (depending on the type of transfer), and you will receive an email with the details of the return. Depending on the return, you may need to obtain additional information and originate the transfer again.
What is the 5 day rule for ACH? ›
A dishonored return must be transmitted within five banking days of the settlement date of the return. Please be aware that the RDFI is able to contest a dishonored return, in which case recovery of the funds would need to happen outside of the ACH Network.
What is the 60 day rule for ACH? ›
Under the ACH rules, the customer's bank is obliged to refund the debits without question, as long as the request was received within 60 days from the NACHA transaction date. (In contrast, businesses have only 2 days to request a return.)
What happens if an ACH payment is returned? ›
Similar to bounced checks, there are fees and risks involved in ACH returns. For starters, ACH returns typically cost between $2 and $5, depending on the ACH processor. An end user may incur fees from their bank if an ACH transaction is returned due to insufficient funds or results in an overdraft to the bank account.
Will an ACH go through with insufficient funds? ›
Even after an ACH payment is processed, the sender may receive a payment rejection code later. Such transactions can fail due to multiple reasons. However, the most common reasons why they fail include: Insufficient Funds: In this case, the sender of funds does not have enough balance in their bank account.
Can an ACH payment go through with insufficient funds? ›
Because payments are taken automatically with ACH debit payments, the payment process may initiate even if you don't have sufficient funds in your account.
Can a company reject an ACH payment? ›
Because ACH transactions do not process in real-time like a credit or debit card authorization, they can be returned or rejected after the transaction is assumed complete.
Upon rejection, the original entry is returned, usually within two business days. In a few cases (like Return Reason Codes R07 and R10 where the consumer is disputing or revoking authorization), it may take up to two months or 60 calendar days after the transaction was originated to process an ACH return.
Why would an ACH payment be rejected? ›
When an ACH transfer cannot be processed, the ACH network returns a “rejection code” or “return code” that explains why a transfer didn't complete. The reason could be as simple as a wrong account number, or as complicated as rules and restrictions that financial institutions place on these types of transactions.
How long does it take a bank to reject an ACH payment? ›
ACH Returns do not happen immediately upon payment, as you might expect for credit card declines. Instead, ACH payments on business bank accounts may be returned within 1-2 days of the payment. ACH payments on consumer bank accounts may be returned within 1-60 days of the payment.
How long does it take for an ACH transfer to be returned? ›
What's the time frame for an ACH debit return? It usually takes two banking days for an ACH return to complete. However, there are select ACH return codes that result in a 60 banking-day return period.
Do ACH payments always go through? ›
Many banks process ACH transfers in batches only a few times per day. Some even only process them once per day, so if you miss the cutoff for the batch that day, you'll have to wait another day for processing to take place.
Can an ACH reversal be returned? ›
An RDFI may return an improper Reversal to a non-consumer account by transmitting a return using Return Reason Code R17 (File Record Edit Criteria/Entry with Invalid Account Number Initiated Under Questionable Circ*mstances/Return of Improperly-Initiated Reversal) in such time and manner that the return is made ...
Do ACH payments have limits? ›
The maximum ACH transfer limit varies depending on your financial institution and account type. Potential limits range from $3,500 per day (Bank of America) to $25,000 per day (JPMorgan Chase) for personal checking and savings accounts.
What is the limit on ACH services? ›
For Same-Day ACH payments, the transfer limit increased from $100,000 to $1million effective from 18th March 2022.
What are the risks of ACH returns? ›
Similar to bounced checks, there are fees and risks involved in ACH returns. For starters, ACH returns typically cost between $2 and $5, depending on the ACH processor. An end user may incur fees from their bank if an ACH transaction is returned due to insufficient funds or results in an overdraft to the bank account.
Can an ACH go through with insufficient funds? ›
The only hiccup you may encounter with ACH payments are “bounced” transfers, due to insufficient funds in your customer's account. Just as with paper checks, ACH transactions can't go through unless there is enough money in the payer's account.
