Checks seem like a pretty mundane part of banking, but when they say “Do not convert to ACH”, that means the payer doesn’t want the funds transferred electronically. Rather, they’re requesting manual processing.
Here, learn more about the implications of these five little words on a check.
Table of Contents
- ACH System 101
- How Does ACH Work?
- What Is Check Conversion?
- What Does Conversion to ACH Mean?
- Why Might a Check Be Converted to ACH?
- Can a Check Be Converted to ACH?
- What Does It Mean When a Check Says “Do Not Convert to ACH”?
- What Is the Benefit to the Drawee if a Check Says “Do Not Convert to ACH”?
- What Is the Difference Between ACH and a Check?
- FAQ
Key Points
• When a check says “Do not convert to ACH”, it means the payer is requesting manual processing rather than allowing the payment to be turned into an electronic transfer.
• The Automated Clearing House (ACH) system is a U.S.-based network that enables electronic money transfers such as direct deposit, bill pay, and peer-to-peer payments.
• Check conversion allows a paper check to be processed electronically through ACH, often making transactions faster, cheaper, and less prone to errors.
• ACH transfers may take 1-3 business days to process, making them faster than traditional paper checks but slower than wire transfers.
• If a check can’t or shouldn’t be converted to ACH, it must go through the traditional check-clearing process, which can take longer for funds to become available.
ACH System 101
First, understand what ACH is. It stands for Automated Clearing House, which is an electronic system that transfers funds throughout the United States. This network allows individuals and businesses to move money from one financial institution to another, quickly and securely.
Every time you set up automatic bill pay, receive your paycheck by direct deposit, or write an eCheck, that’s the ACH network at work. Apps such as PayPal and Venmo also use the ACH network to send and receive money.
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How Does ACH Work?
ACH transfers are initiated by either making a withdrawal or a deposit into an account. You can send money to another account on a one-time basis — such as through an ACH debit to a utility company or a money transfer to a friend for your share of a restaurant meal — or opt into recurring payments. For example, some companies allow you to make automatic payments, such as for subscription services. In either case, you give permission for the receiver to initiate a withdrawal from your account.
You can also get money via an ACH credit. This happens when people receive a direct deposit of their paycheck or Social Security.
Once you or someone else initiates a transfer, the request will be processed first by your financial institution, typically in 1-3 days but sometimes by the next business day. You may be able to expedite the request or schedule a transfer for a future date.
Typically, ACH transfers are faster than traditional paper checks but slower than wire transfers. And while there’s a cross-border component, ACH is most closely associated with domestic U.S. payments. That’s one of the distinctions between an ACH vs. wire transfer, incidentally — the latter has a better global reach.
What Is Check Conversion?
Check conversion refers to the process of transforming a check payment into an electronic payment. This usually happens at one of these three points:
• Point of purchase (POP), meaning when a purchase is made, say, at a store
• Accounts receivable conversion (ARC), when a business receives a check by mail and then processes it electronically
• Back office conversion (BOC), when a check is processed electronically after acceptance at, say, the office of a retail location
What Does Conversion to ACH Mean?
ACH conversion describes the fact that a paper check will be converted to a payment that’s processed through the ACH network. In other words, even though a paper check was written and used as payment, it’ll become an electronic ACH transfer.
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Why Might a Check Be Converted to ACH?
The main reason why a check may be converted is to save time and money when processing payments. Plus, converting a check payment to ACH could be more efficient, as it can help financial institutions detect potential bank fraud earlier, make fewer mistakes, and even result in fewer returned payments. The service of ACH transfers is typically free to consumers.
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Can a Check Be Converted to ACH?
A check can be converted to ACH in many cases (unless it says “do not convert to ACH”) to help it move swiftly and securely. There’s no paper check to get lost or be forged, for instance.
How the conversion usually happens: When the check gets deposited in a checking account, the payment details are captured from the check. Then, the check itself will be stored securely by the financial institution — unless you have the physical check and are making a mobile deposit. If the check is converted in person, the original check will be voided and given back to the payer.
If the check was converted for ACH, it’ll typically appear on a bank statement as a direct payment (or withdrawal) in the same section as ATM withdrawals or other forms of electronic payments. It could also appear as a check payment — some banks include a scanned image of the check or include the payment details.
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What Does It Mean When a Check Says “Do Not Convert to ACH”?
When a check says “do not convert to ACH”, it means that the payer doesn’t want to make a payment electronically. Instead, the payment needs to be processed manually from one financial institution to another through the check collection system.
More specifically, it means the financial institution will contact the other financial institution to request the funds, which are then delivered through a central clearing facility — an ACH operator — which is either the Federal Reserve Bank or a private sector organization.
It’s rare to receive a check that says this on it, but if you do, there’s not much to be done to alter the payer’s request.
What Is the Benefit to the Drawee if a Check Says “Do Not Convert to ACH”?
Checks that say “Do not convert to ACH” may sometimes be printed when a payer is issuing multiple checks (for example, if a class action suit is being paid out). In this case, perhaps the check issuer doesn’t want the much faster electronic processing of their checks. Perhaps it suits them to have a slow payment process.
What Is the Difference Between ACH and a Check?
The difference between ACH and check payments is the network by which they’re processed. ACH payments are processed electronically through the ACH network, whereas nonconverted paper checks are processed manually. In many cases, ACH transfers are processed faster than paper checks since you may have to wait for a check to clear.
The Takeaway
When it comes to getting paid, converting a paper check to an ACH transaction is most likely the fastest, safest way. Unfortunately, there’s not much you can do if the check you receive says “Do not convert to ACH,” however rare that may be. You’ll probably need to deposit it and allow the extra time required for it to become available cash.
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FAQ
Can an ACH payment be declined?
Yes, an Automated Clearing House payment may be declined or rejected for a few reasons, the most common one being that the payer doesn’t have enough funds in their account for the transfer. Other reasons include that the account was closed by the time the transfer took place, the funds have been frozen, or the payer has stopped the payment request.
What does “ineligible for conversion” mean on a check?
If a check says “ineligible for conversion,” it means the check can’t be converted to an Automated Clearing House payment. This may be due to the paper the check was printed on. The payee needs to either cash or deposit the actual check at a local branch.
Why would a bank reject a check?
There are several reasons a bank would reject a check, including:
• You don’t have an account at the bank where you want to cash the check.
• You don’t have proper identification to show to the bank.
• The amount may be too large for the financial institution to process.
• The check is void (for example, the check is old and the payment is no longer valid).
• The signature on the check doesn’t match what the bank has on file.
About the author
Sarah Li Cain
Sarah Li Cain, AFC is a finance and small business writer with over a decade of experience. Her work has been featured in numerous publications, including Kiplinger, Fortune, CNBC Select, U.S. News & World Report, and Redbook. Read full bio.
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