Difference between ACH and RTGS

Difference between ACH and RTGS

Automated Clearing House (ACH) and Real-Time Gross Settlement (RTGS) are bank transfers that may look similar but are totally different. For one, Automated Clearing House (ACH), the settlement is done in installments while Real Time Gross Settlement (RTGS) is handed directly to an individual.

ACH is a payment method that was introduced in America in the 1970s. RTGS, on the other hand, is the fastest way to transfer money. When you go for this transfer system, you will transfer money in real-time and on a gross basis. There is no waiting period during the transaction, and you have to be present as it operates on a one-on-one basis. One perk about RTGS is that it is the fastest medium of exchange.

What is Automated Clearing House (ACH)

Automated Clearing House (ACH) is a clearing system that is also known as an electronic clearing system. It is managed by the National Automated Clearing House System (NACHA). It is an independent body that maintains and regulates the flow of funds in the system of ACH.

The transfer system was created in the 70s to get an instance of money transfer while reducing paper bills and checks. It gradually was integrated into various economies and changed over time to become an electronic facilitating settlement system.

It continues to give relief to private and corporate sectors, as it offers huge volumes of repetitive payment. The good thing about this payment system is that it gave a centralized payment unit through UID and outlined guidelines to its users.

In layman’s language, ACH is a system that enables its users to transfer money from one bank to another electronically in batches. You can transfer payments or make deposits. Revenue in the form of pension, salaries, and interest benefits are referred to as ACH deposits. You will register as a debit transfer-ACH payment when you wish to pay bills to an organization or individual.

If it’s a person-to-person form of payment, you will enjoy additional-free transactions, and the process is quite fast. It will take a period of 2-3 days to complete the transaction. The process is excellent if you desire to make repetitive payments.

What is RTGS?

US Fedwire first set up Real-Time Gross Settlement (RTGS) in the 70s to make instant payments. They are made face-to-face and don’t involve any debit or credit balance.

The idea was to make huge volumes of transfers for private and corporate sectors. The charges here will depend on the bank you are dealing with. For the most part, banks usually put an upper limit that they can charge. Today, this method of transferring money is headed by the central bank. Its unique feature is that you will be able to transfer money on a real-time basis.

The transactions are independent and are not affected by net settlement units. When you go for RTGS transfers, it minimizes the delivery risk factor with large volumes of money. However, you have to be extra careful because the transfers are vulnerable to digital fraud.

The two banks associated with the transfer must be aware of the transaction and be in core banking, a convenient service for low and high-volume transfers. The central bank has incorporated RTGS to compete fairly with the market’s growth. Such transfers are suitable for the overall increase in economic development.

Difference between ACH and RTGS

The main difference between these two transfer systems includes:

  • ACH means Automated Clearing House while RTGS means Real Time Gross Settlement
  • ACH permits electronic payment transfers between banks over a centralized unit network while RTGS offers settlement transfer of funds between banks
  • The transaction in ACH is dependent on net debit or credit balance units. On the other hand, RTGS is independent of these systems.
  • Money transfers in Automated Clearing House are done in bunches, while Gross Settlement is done independently in Real-Time.
  • ACH services are free of charges, so you are able to transact low and high volumes transfers while RTGS have charges set, and they are suitable for low and high volumes payment transfers
  • Payment of ACH is done within 2-3 days, while RTGS is done within one day.


Banks have come up with various payment solutions to cater to your unique needs for individuals and businesses wishing to transact money or make payments. The central bank fostered the creation of ACH and RTGS as alternative payment methods, among others that they are spurring up.

The differences between them are clear as stated, ACH is dependent on debt to credit ratio in order to make payment, while RTGS payments are handled individually. ACH is suitable for making low paying payments like pensions, interest, and salaries while RTGS is ideal for high-value payments. Having a better understanding of these two options will help you have an easy time while transacting.