What types of payments do automatic clearing houses typically handle?

Automatic Clearing Houses (ACH) are designed primarily to process low-value payments efficiently. This payment mechanism is commonly utilized for transactions such as payroll deposits, direct debits for utility bills, and various recurring payments. The advantage of ACH transactions lies in their cost-effectiveness and ability to handle a high volume of transactions without the high fees associated with other methods.

Low-value payments are typically those that do not exceed a certain monetary threshold, making the ACH system particularly well-suited for everyday financial activities that require a reliable, automated settlement process. Unlike high-value payments, which often necessitate more robust security and quicker processing times, ACH transactions can settle over a longer period, which is acceptable for these smaller amounts.

Other payment types like international payments, high-value payments, and cash transactions do not align well with the functionality of the ACH system. International payments typically require different processing networks due to cross-border regulations and exchange rates. High-value payments often utilize systems such as Real-Time Gross Settlement (RTGS) to facilitate immediate settlement. Cash transactions, on the other hand, involve physical currency exchange and do not use electronic systems, thus falling outside the scope of ACH functions.