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.
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 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 happens if an ACH transfer fails? ›
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.
How many times can an ACH be submitted? ›
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 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.)
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.
What are the restrictions on ACH payments? ›
For Same-Day ACH payments, the transfer limit increased from $100,000 to $1million effective from 18th March 2022.
Can an ACH payment be Cancelled? ›
While some banks will be able to cancel an ACH payment over the phone or online, others may require you to submit a form requesting the cancellation. Recurring ACH debit payments are able to be cancelled, but you must do so at least three business days before the payment is due.
Do ACH payments always go through? ›
The vast majority of ACH transactions process without issue, but when a transaction cannot be completed, a return is triggered. To understand ACH returns, it's important to outline the parties involved and how they interact throughout this process.
A returned payment will likely result in paying additional fees that can add up quickly. “If the payment is rejected, you might be charged two fees: one by the credit card company and one by your bank,” says Ted Rossman, a senior industry analyst for Bankrate.com, CNET's sister site.
What are the risks of ACH payments? ›
In addition to “insider employee fraud” typical examples of ACH scams include: Data breaches: Criminals often gain access to customer credentials via a data breach. In this scenario, fraudsters log into bank accounts with bought or stolen information from the dark web before withdrawing funds through the ACH network.
What if I sent ACH to a wrong account? ›
As soon as the payment originator realizes the error, the reversal process usually starts by emailing the recipient to alert them of the error and then contacting the bank to fill out a “Reversal Request” form as soon as possible.
How many times can a company retry a payment? ›
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 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.
Can ACH payments be declined? ›
ACH stands for Automated Clearing House and is a means of processing checks faster electronically. If your business accepts ACH payments, you've likely wondered "What does rejected mean?" Just like traditional checks, ACH payments can be rejected due to incorrect information or insufficient funds.
How long does it take for a rejected ACH transfer to return? ›
Codes R05 and R07 are only used for consumer accounts and can take up to 60 calendar days to resolve. The majority of other return codes take about two banking days to resolve. However, it is important to note that the ODFI and RDFI handle the resolution of ACH returns as governed by NACHA.
What should be done if a payment is rejected by bank? ›
If a payment has been rejected, the payment will be marked with red "stop" symbol, which means that it has been declined. The reason for the rejection is indicated in the payment details: Information for the client. Check the reason for rejection and complete the relevant actions to enable you to make a new payment.
Can a bank reverse an ACH payment? ›
Yes. Banks can reverse ACH payments under certain circ*mstances. This process is known as an ACH return or ACH reversal. Still, just because banks can reverse ACH transactions doesn't mean they always will.
How long does it take for a ACH payment to be refunded? ›
When this happens, the Receiving Depository Financial Institution (RDFI) automatically initiates a return of the funds to the Originating Depository Financial Institution (ODFI). The average processing time for an ACH transfer is typically two banking days but can vary depending on the financial institution.
