We’ve all been there: you send an invoice and wait for funds to arrive—then days (or weeks) later you get a notice that the ACH payment was returned. What happened?
Don’t worry. ACH returns are common and usually trace back to a handful of reasons. Below, we explain what an ACH return is, how it works, the most common ACH return codes, typical ACH return fees, and practical steps to avoid repeat issues.
What is an ACH return?
An ACH return happens when your customer’s bank rejects the ACH payment you attempted to pull from their account. The bank sends back a return code that explains why it failed so you know what went wrong and what to do next.
ACH return vs. ACH dispute
· ACH return: The debit fails and is sent back with a code (e.g., insufficient funds, bad account number).
· ACH dispute: The debit went through, but the customer later reports it as unauthorized or improper. Their bank may place a hold or initiate a reversal under NACHA rules.
How does an ACH return work?
When you accept an ACH payment (via invoice, virtual terminal, payment page, or recurring billing), two banks help move money through the ACH network:
· ODFI (Originating Depository Financial Institution): Your bank or your processor’s bank. It initiates the ACH entry on your behalf.
· RDFI (Receiving Depository Financial Institution): Your customer’s bank. It receives the request and decides whether to approve or reject the payment.
If something’s off, the RDFI rejects the entry and sends an ACH return code back to the ODFI. Your ACH provider relays that code to you with a description and next steps.
With Liftoff Platform, you receive a clear notification outlining:
· The specific return code
· A plain-English explanation
· Recommended next actions (e.g., collect new authorization, retry on a date with funds, request alternate payment)
Common ACH return codes (and what they mean)
Below are frequently seen ACH return codes and plain-English meanings:
· R01 – Insufficient Funds
· R02 – Account Closed
· R03 – No Account / Unable to Locate Account
· R04 – Invalid Account Number
· R08 – Payment Stopped
· R10 – Customer Advises Not Authorized / Improper / Ineligible
· R13 – Invalid ACH Routing Number
· R16 – Account Frozen / OFAC Instruction
· R20 – Non-Transaction Account
· R29 – Corporate Customer Advises Not Authorized (CCD)
There are dozens of additional codes in the NACHA rulebook. Most merchants will encounter a core set repeatedly; the rarer codes still follow the same “reason + remedy” pattern.
Why ACH payments get returned (most common causes)
· Insufficient funds in the customer’s account
· Bad or mistyped routing/account numbers
· Closed, frozen, or non-transaction accounts
· Authorization issues (no consent, revoked authorization, or wrong SEC type)
· Stop payment requests from the customer
· Name or account mismatches flagged by the bank
· Fraud screening or OFAC-related holds
Even though ACH is secure and well-regulated, banks will flag and return entries that don’t meet NACHA rules or appear risky.
How much is an ACH return fee?
Many processors assess a return fee when an ACH entry is rejected—commonly around $10– $15—in addition to your standard processing fees. Exact amounts vary by provider.
Liftoff Platform uses transparent pricing and clearly itemizes any return-related costs on your statement so you’re never guessing what a return actually cost your business.
Can you avoid ACH return fees?
Often, yes—if you catch the issue before settlement. ACH entries batch and settle on banking schedules; within this window you can void an entry rather than refund it. A void typically avoids additional fees, while a post-settlement refund may not.
Pro tips to reduce returns and fees:
· Validate routing/account numbers at entry.
· Use the correct SEC code and collect NACHA-compliant authorization.
· For R01 (Insufficient Funds), retry on known paydays or use smart retries.
· Offer a backup method (card, RTP, or wire) when timing is critical.
· Notify customers before debits (email/SMS) to minimize surprises and stops.
What if I have too many ACH returns?
NACHA sets return rate thresholds—notably a 0.5% cap for unauthorized return categories (e.g., R05, R07, R10, R29, R51). Excessive returns can trigger warnings, monitoring, or fines. As a rule of thumb:
· Keep overall return rates low,
· Maintain a strong authorization process, and
· Monitor unauthorized categories specifically.
Liftoff Platform provides reporting to track return rates by code and helps you tighten authorization and retry logic if you approach thresholds.
What to do when you receive an ACH return code (quick checklist)
1. Read the code and message from your provider.
2. Pick the remedy based on the code:
· R01 (NSF): Retry on a better date or use an alternate method.
· R03/R04/R13: Re-collect and verify bank details.
· R10/R29: Obtain a new, valid authorization or switch to a different payment type.
· R08: Contact the customer to lift the stop payment or arrange alternatives.
3. Void vs. refund: If still pre-settlement, void to avoid extra fees.
4. Document everything: Keep authorizations and communications organized.
5. Adjust your process: Add pre-debit reminders, validation, or smarter retries.
Manage ACH returns effectively with Liftoff Platform
Liftoff Platform gives you straightforward notifications, clear explanations, and practical recommendations for each ACH return—plus tools for invoicing, virtual terminal, recurring billing, and payment pages, all designed to keep return rates low and cash flow predictable. Our team can also help you tune authorization language, retry schedules, and dunning workflows so you spend less time chasing payments.
FAQs
Why am I being charged an ACH return fee?
Processors may charge a fee to cover handling of a failed ACH entry. It’s typically added on top of standard processing fees. Policies vary by provider; review your pricing to understand when fees apply.
What are the risks of ACH returns?
Return delay payouts, add costs, and increase operational work. High return rates—especially unauthorized categories—can trigger processor or bank scrutiny. The key is fast detection, clear communication with customers, and process improvements to prevent repeats.
Will an ACH go through with insufficient funds?
No. The customer’s bank will return the entry (often R01: Insufficient Funds). You can retry later, request a different payment method, or use a scheduled installment plan.
Who pays ACH return fees?
Usually the merchant. Return fees are assessed by the processor and appear on your statement. Some providers structure fees differently; always check your agreement.
How long do ACH returns take to show up?
Returns often surface within 2–5 business days, depending on the code and bank timing. Monitor your ACH reports daily so you can void, retry, or switch methods quickly.