ACH versus Check 21

What is the difference between ACH and Check 21?

Understanding the differences between ACH and Check 21 can help you, as a merchant, to decide which system meets both your requirements and your customers' needs. One key difference between the two is the way payments are handled. Payment21® can clear check payments in both U.S. banking formats: ACH and Check 21. The chart below provides additional details.

Transaction standard 


Check 21

Clearing time

3-5 working days

Instant (same day) or next day

Eligible transactions

Consumer Checks, Corporate Checks, Direct Debits, Direct Credits, Check 21 Conversion to ACH, Electronic Cash Letter

Electronic Payment Orders (EPO), Demand Drafts (debits), Direct Deposit by Image Cash Letter, Consumer Checks, Business Checks, Personal Checks, Cashier Checks, Money Orders

Dispute terms

A consumer can dispute a transaction by phone. Generally, consumers are not responsible for unauthorized ACH transactions.

Time window for PPD is 60 days, and two days for CCD. Liability for FI to FI is extendable in case of bank fraud.

Consumers can request to opt out of ACH processing. The bank can place an ACH block on a consumer's account to block any and all subsequent ACH-transactions.

The customer's claim can be made orally; the bank may require the consumer to submit a written claim or request that he/she raise the dispute in person at the customer's local bank branch. Normally banks require the customer to fill out a form or affidavit. Just as with credit and debit card and ACH transactions, consumers are generally not responsible for unauthorized check and RCPO transactions.   

Time window is 40 days for B2C and B2B. Under specific circumstances the bank my extend the claim period. The 40 days are counted from the time the customers receives the statement or substitute check; and the bank has a deadline of 10 days for dealing with the claim. Final decision must be conducted by the end of 45 calendar days from the date the claim is made.

Liability for FI to FI is one year in case of bank fraud.


Format of batch file varies by bank

ANSI X9-files referred to as Image Cash Letter (ICL)


ODFIs via Automated Clearing House (ACH)

Financial Institutions via Image Exchange Networks / Federal Reserve System


Regular checking accounts

Supported by all U.S.-bank accounts and credit union accounts

Cost per transaction

Lower than credit cards

Lower than credit cards

Governing Body

NACHA rules and the Federal Reserve

Check 21 Act, Uniform Commercial Code (UCC), Federal and State Check Law

Authorization WEB-entry by consumer: 

Authorization language, date and timestamp of the login.

ACH Debit by merchant: 

Authorization must be in writing and signed or similarly authenticated in compliance with electronic signature laws.


Voice recording

Check Drafts: 

No signature required. Preauthorization is obtained in a commercially reasonable manner = consumer's consent in writing (mail, fax, online, by contract or implication) or recorded message. Disclaimer is applied on the signature blank. Merchant is required to maintain customer identity verification procedures.

Regular Checks: 

Endorsement through signature.


Electronic process from start to end: 

An eCheck-entry over the WEB is converted to an ACH-entry. 

Electronic data is turned into ACH Debits & Credits. 

Electronic Check 21-items (ICL/IRD) are converted to ACH for further clearing and settlement.

Two-way process with media disruption originating from paper:  

The process supports creating electronic records from paper documents. The check item is truncated and a substitute check image is generated, also called Image Replacement Document (IRD). Banks are allowed to print IRDs for further clearing and settlement. In addition, banks are entitled to convert electronic Check 21 items into ACH. 

Electronic payment data including eCheck-entries via phone and Internet are turned into paper check drafts that get truncated and imaged.


For consumers who have opted out of ACH processing, merchants and banks are required to create a check draft based on the original electronic entry.


ACH versus Check 21

There are three major differences between ACH and Check 21. First of all, Check 21 transactions clear faster than ACH. Secondly, Check 21 and ACH are governed by different regulatory bodies. Thirdly, disputes are handled differently. 

When a WEB-initiated ACH-entry is made to a merchant, Payment21® uses an Originating Depository Financial Institution (ODFI) that is connected with one of the Automated Clearing Houses and processes the eCheck payment as an ACH transaction. The clearing process takes 3 to 5 days. 

With Check 21, Payment21® transmits substitute check images to banks that are linked directly to the Image Exchange Networks. Our Check 21-technology is capable of processing demand drafts, cashier's checks, money orders and business checks as well as personal checks. With Check 21 Image Cash Letter funds clear instantly (same day) at most banks. Some banks put a hold on the money, in which case the check payments clear next day.

The ACH Network is governed by NACHA Operating Rules administered by The Electronic Payments Association, previously the National Automated Clearing House Association (NACHA).

Substitute checks are subject to the Check 21 Act, the Uniform Commercial Code (UCC), existing federal and state check laws, and regulations specific to consumer rights that affect the acceptance of these instruments. Strictly speaking, a substitute check (also called an Image Replacement Document or "IRD") is authorized under The Check Clearing for the 21st Century Act (Check 21 Act). Substitute checks maintain the status of the original paper check and are recognized as legal checks as long as the instruments meet specific requirements. These requirements include the faithful reproduction of the paper check and warranty of the instrument by the reconverting bank, the financial institution that created the substitute check or the first financial institution that transferred or presented it during the check clearing process.

With ACH PPD (Prearranged Payment and Deposits), a customer has up to 60 days to file a dispute and can do so over the phone. PPD is a Standard Entry Class Code (SEC) by the ACH Network. It is used to credit or debit a consumer account and is popularly used for payroll direct deposits and preauthorized bill payments. CCD (Corporate Credit or Debit) is another entry class. It is primarily used for business-to-business transactions. A business customer has 48 hours to reverse the transaction.

With Check 21, a customer has 40 days to file a dispute. Under specific circumstances the bank may extend the claim period. The customer's claim can be made orally; the bank may require the consumer to submit a written claim or request that he/she raise a dispute in person at the customer's local bank branch.

The dispute window is determined by the dispute type; it may be extended to over three months for ACH, resp. up to 365 days for Check 21 depending on the specifics of the case.

While it is not possible to definitively choose ACH over Check 21 or vice versa, merchants must carefully consider the differences between the two before opting for one or the other. 

Begin accepting digital payments in 5 easy steps