ACH returns: How to stop failed bank payments

ACH transfer volume and value has been growing steadily, up 8% to $23.3 trillion in Q2 2025. 

But what happens when these payments are returned?

Bank payment failures are called “ACH returns,” and these issues create a ripple effect of operational, financial, and reputational costs for your business. It’s a headache for anyone involved.

That’s why stopping failed ACH payments is important. It protects your cash flow, reduces administrative burden, and minimizes compliance risks. 

In order to stop failed ACH payments, you’ll first need to understand how returns work. 

This article breaks down common ACH return codes to make prevention more proactive, plus how Aeropay can help significantly offset your return risk. 

The ACH network

The ACH (Automated Clearing House) network is overseen by NACHA (National Automated Clearing House Association), which was formed in 1974 to help coordinate the expanding network of Automated Clearing Houses in the United States. 

The ACH network facilitates batched and automated bank transfers like salaries, direct deposit, bill payments, and inter-bank transfers. The system offers accelerated processing speeds, lower transaction prices, and is a fraction of credit card and check costs.

There are two main types of ACH transfers:

ACH Credit: The sender “pushes” money to the account holder (like payroll).

ACH Debit: The recipient “pulls” funds from another account with authorization (like utility payments).

When an ACH transfer is rejected or fails for any reason, it is assigned an “R code” in accordance with NACHA’s dedicated rules and then returned to the sender. 

What is an ACH return?

An ACH return is an accepted transaction that is sent back to the originating bank (Originating Depository Financial Institution - ODFI) from the receiving bank (Receiving Depository Financial Institution - RDFI) after already being processed.

The average ACH return rates are up to 2% (with a few originators facing significantly higher rates). NACHA’s monitoring recognizes a 3% threshold for administrative errors (codes R02–R04) and 15% as the overall return limit for debit entries.

That means there are limits to your return rates and fines if you exceed them.

What are ACH return codes?

Also referred to as an “R code,” this is a three-character code that starts with the letter “R” (such as R01, R04, R15) and tells an ODFI exactly why the RDFI will not post the payment. 

For example: 

• The originator sends a payroll file to the ODFI for processing.
• The ODFI then sends it to the ACH network.
• The RDFI checks the posting. If there is an issue (like wrong account number or insufficient funds), the RDFI will return the entry.
• The RDFI sends it back to the ODFI with an R code, specifying the exact reason the transaction was rejected.
• The ODFI goes back to the originator for corrective action.

R codes help to avoid the guesswork by standardizing the process. NACHA rules require the proper management of certain R codes within a certain time frame. This helps the originator immediately fix the issue, so upcoming payments will process successfully.

ODFI vs. RDFI: Who is responsible for what?

ACH returns require both parties to participate in the exchange of R codes. Here is what each bank or financial institution is responsible for:

RDFI

• Detect any payment issues and prevent the transaction
• Send the return within the required timeframe (usually 2 banking days)
• Use the correct R code so the ODFI knows precisely what failed

ODFI

• Receive the R code from the RDFI
• Quickly send the code to the originator (may include documents like Notification of Change - NOC)
• Ensure the originator takes action and follows all NACHA rules

What is an ACH rejection?

ACH rejections occur when the initial transaction is never accepted into the network. In this case, the transaction is not processed.

An ACH rejection usually happens due to invalid data, account information, or compliance issues. Key rejection codes include R01 (Insufficient Funds), R02 (Account Closed), and R04 (Invalid Account Number), each representing specific types of failure.

Why preventing ACH returns is important

There are many administrative and cost-based reasons to avoid ACH payment returns and failures, including:

Avoid ACH return fees

ACH returns trigger fees and penalties—even those outside of your control.

Example: An ACH return code like R01 (Insufficient Funds) may lead to NSF fees from the bank and penalties from vendors.

Protect cash flow

ACH payment failures create cash flow gaps because the funds you were expecting are now delayed or lost. This can disrupt payroll and other operational expenses.

Example: If a $15,000 customer payment comes back as an ACH return (code R02: Account Closed), you may be stuck in collections, with a settlement date weeks or months out.

Minimize risk exposure

NACHA sets rules for limits on certain ACH return rates. The threshold for unauthorized returns is .5%. Exceeding these will lead to fines and account restrictions.

Example: High rates of return will raise NACHA fraud alerts, which may cause closer monitoring by your bank or payment processor.

The cost of ACH returns

Average ACH return fees range from $2 to $5 per return across processors and transaction codes. However, these fees can jump to $20+ depending on a variety of factors. While the ACH payment method is always fast and reliable, failed transfers still happen.

There can be both direct and hidden costs associated with payment failures.

Direct ACH return costs

• Fees range from $2–$5 per return. If you have a lot of returns, this can quickly add up.
• Customer disputes can push fees past $20+ per transaction
• Double charges
• Potential legal issues

Hidden and indirect ACH return costs

• Overhead for labor and systems managing failed transactions
• Extra business days added to transaction processing
• Damage to reputation, customer retention, and user satisfaction
• Higher levels of exposure to compliance alerts, fraud, and operational friction

Real-time example of ACH return costs

If a business has a batch of 1,000 transactions, with a return rate of 3% and $15/return cost, that’s $450 in direct fees alone. 

Now, add in indirect fees. You hire an accountant at $50/hr for 8 hours to sort out returns ($400), plus the cost of using legacy systems, utilities, facilities, etc. ($150), and now you’re up to $1,000 in fees.

Why are ACH transactions exposed to return risk?

Unlike wire transfers or credit card payments, ACH relies on multiple steps, authorizations, and validations—all of which can fail or be disputed. 

These payments depend on accurate account data and reserved funds.

The ACH network also has built-in mechanisms for payment rejection and return. If a payer claims they never authorized a debit, they can initiate a return under NACHA’s rules (usually within 60 days).

Additional reasons why ACH payments are exposed to return risk include:

• Insufficient funds and closed accounts
• Duplicate payments or processing errors
• Fraudulent accounts or suspicious activity

There is a real challenge of real-time validation and latency.

Additional common ACH return codes include:

• R12 - Account Frozen or Suspended
• R13 - Invalid ACH Routing Number
• R15 - Account Holder or Beneficiary Deceased

There are currently 85 ACH return reason codes that can be initiated by the RDFI (receiver’s account), ACH operator, gateway, or Federal Government Agency.

This is why it’s critical to add payments technology that significantly reduces the risk of returned ACH transactions. 

Offload ACH return risk! See Aeropay’s Guaranteed ACH Settlement

Preventing ACH returns: How to protect your payments

Financial technology is the greatest innovator for the success and efficiency of ACH payments. 

This streamlined, API-based solution for account verification, risk decisioning, and money movement is called Pay by Bank. Pay by Bank providers like Aeropay effectively deliver an embedded interface that approves the most transactions, at the lowest risk of return. 

Traditional ACH return prevention methods

Before automation, everything was manual. This included data validation, like checking bank accounts and routing numbers. Authorizations were paper-based, requiring physically signed forms and documents (and no SEC codes).

Micro-deposits were another way of validating account information. Small trial deposits were sent to an account to verify ownership before initiating payment. There was manual follow-up on returns, and batch payments were complex (with errors detected way too late).

Pay by Bank return prevention methods

Pay by bank solutions like Aeropay are API-driven, offering real-time account and balance verification through smart integration options. This ensures immediate ownership and validity at onboarding. 

Additional prevention methods include:

• Real-time NSF prevention with automated balance checks
• 100% risk coverage and return protection for all return codes
• Compliant and embedded authorization flows to reduce unauthorized transactions
• Real-time decisioning with specialized AI models trained on network-wide data.
• Payment recovery engines to retry and collect at optimal times.

How Aeropay prevents ACH returns

Aeropay prevents and protects against ACH returns by combining purpose-built products with deeply integrated risk and recovery systems. Every layer is designed to eliminate bad data, reduce insufficient funds, and stop unauthorized transactions before they hit your bottom line.

Here’s how our platform’s core functionality works together to offset return risk:

Accurate bank verification

Most return risk starts with bad or outdated account data. Sync, our embedded bank-linking product, connects to over 12,000 financial institutions via OAuth and direct login. Redundant, direct data sources feed into an internal normalization layer, standardizing and validating account/routing numbers, account type, and status before payments are initiated.

The impact on returns:

• Prevents R03 – No Account/Unable to Locate and R04 – Invalid Account Number by catching typos, mismatches, and closed accounts at onboarding.
• Institution-level controls enable merchants to block high-risk banks or account types from the outset.

Real-time risk & fraud decisioning

Aeropay’s AI/ML-powered risk engine evaluates 60+ signals in milliseconds. This includes bank name matching, transaction history, device intelligence, and velocity patterns. It learns across the entire Aeropay network, identifying repeat offenders and high-risk behaviors that can trigger returns.

The impact on returns:

• Reduces R05/R07 – Authorization Revoked and R10/R29 – Not Authorized by detecting first-party fraud and suspicious account activity.
• Flags risky transactions before they’re sent to the ACH network.

Balance verification & NSF prevention

Aeropay uses live account data from Sync to confirm balance availability before sending a debit. Our balance checks run in real time for many banks, helping avoid returns tied to insufficient funds.

Impact on returns:

• Minimizes R01 – Insufficient Funds and R09 – Uncollected Funds with instant NSF detection.
• For soft failures, risk models apply intelligent retry logic based on predicted fund availability windows.

Guaranteed ACH coverage

Aeropay’s Guaranteed ACH covers all R-codes — from insufficient funds to unauthorized disputes — giving merchants complete protection.

Impact on returns:

• Eliminates direct financial exposure from any ACH return.
• Simplifies revenue forecasting by removing the uncertainty of post-settlement losses.

Make ACH work for your business

ACH offers real value to businesses across the United States. But without proper return prevention and protection, the payment method can be expensive, inefficient and risky. Returns don’t have to be '"just the cost of doing business."

Aeropay helps you forget about return risk, so you can leverage Pay by Bank for efficient, profitable growth:

• Stop bad data before it starts with Sync, our embedded bank linking solution that connects to 12,000+ banks in under 20 seconds and cuts return codes like R03 (No Account) and R04 (Invalid Account) by up to 66%.
• Detect NSF in real time with balance verification, preventing R01 (Insufficient Funds) before a debit even hits.
• Block fraud and unauthorized returns with an AI risk engine that learns across the entire Aeropay network.
• Eliminate exposure altogether with Guaranteed ACH coverage on every R-code, so you keep your revenue even if a payment comes back.

Merchants who adopt Aeropay see higher acceptance rates, faster settlement, and fewer hours wasted chasing down failed transactions. Instead of absorbing the cost of returns, you can finally turn ACH into the high-conversion, low-cost payment method it was meant to be.

Connect with our team to see how much stronger your cash flow can be.