What is the difference between an ACH credit and an ACH debit?

The distinction between an ACH credit and an ACH debit is key to understanding how electronic funds transfers operate in the ACH network. An ACH credit is a transaction that sends funds to an account, whereas an ACH debit is a transaction that withdraws funds from an account. In practical terms, when an entity initiates an ACH credit, they are directing the movement of money into someone's bank account, such as in the case of payroll deposits or tax refunds.

On the other hand, an ACH debit is initiated by an entity to pull funds from a consumer's or business's account, such as when a utility bill is paid automatically each month. This understanding of the roles of both credits and debits is crucial, as it defines the flow of money in electronic transactions and helps individuals and entities manage their finances appropriately within the ACH system.