An automated clearing house (ACH) payment authorization form authorizes a business to make automatic drafts from your bank account to pay a bill. These can allow for one-time payments or automatic payments that happen at regular intervals. While it might sound a bit similar, authorizing this type of payment isn’t the same thing as a making a wire transfer.
Instead, this is a method of making a payment without needing to take continuous action. You don’t have to write a check, swipe a card or take action beyond filling out the initial authorization form, which can help you stay on top of bill due dates. If you’re looking to streamline the process of paying your bills on time, you’ll need to complete an ACH payment authorization form to set up an electronic funds transfer (EFTs). Here’s what you need to know about these forms and the process for submitting them.
Sometimes banks and businesses include ACH payment authorization forms in the initial packet of documents that you sign when you first take out a new loan or open a new account. Some lenders also incentivize automatic payments by reducing your monthly bill by a few dollars if you agree to allow ACH deductions. Businesses have to pay fees to accept any form of electronic payment, but the fees for ACH transfers are more reasonable. If you’re provided an ACH authorization form when you obtain a loan or open an account, you can fill it out and give it to the institution you’re paying right away — and you’ll immediately start the automatic payment process.
You can also get an ACH payment authorization form directly from your bank if you decide you want to set up ACH payments later on. Because you probably bank and interact with businesses both in-person and online, there are various ways you can complete an ACH payment authorization. Most banks have forms available in local branches. Web-based forms are also available on bank websites and mobile apps. Many banks and credit unions provide online forms for ACH payment authorization in the sections of their websites that deal with setting up online bill payments.
There are various ways to complete and e-sign an ACH payment form online, even if it’s provided with loan documents. Many banks and businesses also allow you to initiate an ACH payment authorization over the phone by calling the customer service department. Most businesses that offer online transactions and account access, from small public utility companies to major mortgage lenders, have sections of their websites dedicated to helping customers set up automatic payments.
What’s Included on an ACH Payment Authorization Form?
Regardless of where you access the form, a few key pieces of personal information are standard across ACH payment authorizations. The form must include your name and the name of the business or institution you’re setting up payments with. In most cases, you can simply provide the exact name of the business. This is especially true when the business you’re paying, gives you the form — you won’t need to know the routing number or account information for the business. Banks and credit unions that offer online bill payments often have directories of businesses that have opted into their systems, and they may be able to access the business’ information once you’ve provided the name.
On the ACH form, you’ll also need to clearly identify the exact bank account you’re authorizing the bank or business to deduct payments from. In addition to providing your routing number and account number, you also need to specify whether the bank account is a checking account or a savings account. If you’re using a form your bank has provided, you may not need to include the bank name. Otherwise, you should also name the bank the payment will be drafted from.
Other mandatory information on an ACH payment authorization form relates to the specifics of the payment itself. This means you’ll need to determine whether you’re authorizing a one-time payment or a recurring payment. If the payment is recurring, you’ll need to indicate how often the business can deduct these payments from your bank account. Examples of frequencies are weekly, monthly, quarterly and annual intervals.
For a one-time payment, you need to include the exact amount of the payment. For a recurring payment, you may be permitted to choose a flat payment amount, or you may have the option to pay a bill in full each month. You may also have the option to set a number that any individual recurring payment can never exceed. This allows for some natural flexibility in payments. For example, your six-month car insurance premium may be an uneven number that, when divided by six months to create monthly payments, doesn’t come out to the same amount each month. Although the payment may usually be $100 per month, your last payment of the six-month policy may only be $80. If you choose a set number above these, you’ll ensure your payment is deducted in full automatically each month.
Although it’s not mandatory information, some businesses also ask for your email address and phone number on ACH forms. This is another way to prevent errors. For example, there may be hundreds of customers named John Smith with accounts at the utility company, but it’s highly unlikely two John Smiths will also have the same phone number and email address. This additional information gives the business a clear way of contacting you if there’s a problem with your payment.
How to Manage and Cancel ACH Payment Authorizations
ACH payments are governed by the National Automated Clearing House Association (NACHA), so businesses and financial institutions must follow clear standards for starting and stopping ACH payments. There are only three reasons an ACH payment can be reversed. A payment reversal can happen if the payment wasn’t authorized, if the payment amount exceeds the authorized amount or if an authorized payment was drafted twice.
If you no longer wish to make automatic payments to a particular business, you shouldn’t rely on reversals. Instead, you need to cancel the authorization, which revokes the business’ access to draft future automatic payments. When canceling an ACH transfer, you may need to contact two parties: Both your bank and the business you’re paying need to know about the cancellation. You may be able to complete this process online, particularly if you also filled out the initial ACH authorization in an online portal.
For other businesses, it may be necessary to make a phone call. Calls and online actions usually take effect quickly. However, it’s best practice to follow up with a written notice to both the bank and the business you’re canceling automatic payments with. Contact the bank to figure out where you should mail written copies of stop-payment notices.
Many banks also allow you to make edits to authorizations through online automatic bill pay portals, such as if you need to change details like the payment date or maximum payment amount. In some cases, banks and credit unions charge a fee for stopping an ACH transfer.