FedNow vs. ACH: How They Differ

Images by GettyImages; Illustration by Hunter Newton/Bankrate

The Federal Reserve launched its FedNow instant payment service in July 2023, promising to revolutionize how Americans send and receive money. Unlike traditional bank transfers that can take days to process, FedNow delivers funds instantly — any hour of any day, including weekends and holidays.

But most Americans still can’t use FedNow because it’s only available at select financial institutions. For now, the slower but reliable Automated Clearing House (ACH) system remains the backbone of digital payments for everything from direct deposit to online bill payments.

What is FedNow?

FedNow is the Federal Reserve’s instant payment service that enables banks and credit unions to transfer money between accounts in seconds, not days. It operates 24 hours a day, seven days a week, making it the first settlement service that supports truly instant payments.

Think of FedNow as the digital equivalent of handing someone cash — the transaction is immediate and final. When you send money through FedNow, the recipient’s account is credited within seconds, regardless of the time or day.

As of 2025, more than 1,400 financial institutions use FedNow. However, many participating banks currently only offer receive-only capabilities due to fraud prevention concerns.

FedNow has a maximum daily transaction limit of $500,000, significantly lower than ACH’s $1 million daily limit. The Federal Reserve charges banks a small fee to use the service, which institutions may pass on to customers for sending payments.

“I do not see financial institutions charging to receive funds via FedNow, but I can see them charging to send payments,” says Todd Koehn, vice president of Faster Payment Solutions at Bankers’ Bank.

What is ACH?

The Automated Clearing House (ACH) system has been the workhorse of American digital payments since the 1970s. If you’ve ever received your paycheck via direct deposit or set up automatic bill payments, you’ve used ACH.

Unlike FedNow’s real-time processing, ACH payments are batch-processed, meaning banks bundle multiple transactions together and process them in groups. This explains why ACH transfers typically take 1-3 business days to complete.

The system’s reach is enormous. According to the National Automated Clearing House Association (NACHA), in 2024:

• 94 percent of W-2 employees receive paychecks via ACH direct deposit
• The network processed over 86 billion in transactions
• Consumer bill payments account for a significant portion of ACH volume

When you initiate an ACH transfer, your bank doesn’t immediately send the money. Instead, it adds your transaction to a batch that gets processed at specific times throughout the day. This batch-processing approach keeps costs low but sacrifices speed.

Find banks that offer the payment services you need: View Bankrate’s best online banks.

FedNow vs. ACH

The key difference comes down to speed versus availability. FedNow offers instant gratification but limited access, while ACH provides universal coverage with planned delays.

Current limitations of FedNow

Despite its technological advantages, FedNow faces significant adoption challenges that limit its immediate usefulness for most consumers.

• Limited bank participation: While the number of participating institutions continues to grow, many major banks are taking a more cautious approach. Even banks that have joined often restrict services to receiving payments only, not sending them.
• Fraud prevention concerns: When money moves instantly, banks have less time to detect and prevent fraudulent transactions, leading many to implement receive-only capabilities initially.
• Geographic and service limitations: FedNow currently only supports domestic transfers. If you need to send money internationally, you’ll still need to rely on wire transfers or other services.

How this affects your banking decisions

The payment systems your bank supports should factor into your bank selection process. If instant payments matter to you, prioritize banks that offer full FedNow sending and receiving capabilities.

However, don’t choose a bank solely based on FedNow availability. Consider the complete package: interest rates, fees, customer service and digital banking features.

Bottom line

FedNow and ACH serve different purposes in today’s payment landscape. FedNow offers the speed of instant transfers but with limited availability, while ACH provides universal coverage with predictable delays.

For most consumers in 2025, ACH will continue to handle the majority of digital payments. FedNow will gradually expand its reach, but full adoption will take several years as banks build the necessary fraud prevention infrastructure. The smart approach is to understand both systems and choose banks that offer the payment options most relevant to your financial needs.