Overview  

The following guide outlines what ACH Returns are, how they occur, how using Astra reduces the risk of returns (as well as the reduces the operational overhead), and the resources available to help track and manage ACH Returns in real-time. 

What Are ACH Return Codes?   

When an ACH transaction cannot be completed, the Originating Depository Financial Institution (ODFI) sends a notice to the Receiving Depository Financial Institution (RDFI). This notice includes a code, called an ACH return code. The code includes an R and a 2-digit number, such as R01, R04, or R78. Please note that the RDFI can also send return code notices to the ODFI. We’ll cover both examples in the next section. 

How Do ACH Return Codes Happen? 

For the purposes of this guide, we’ll use the following example for context: A User opens a new bank account with a Neobank and attempts to fund this newly opened bank account via an ACH transfer. 

Step 01: The User creates a request to move funds from their personal bank account (e.g. their Chase Personal Checking account) to their newly opened DDA account through the Neobank Application. 

Step 02: At the time the request was made, the User had sufficient funds in their account, but later in the day, right before the ACH file was submitted to the Federal Reserve, via the NACHA network (the last window is at 5 pm ET), the User inadvertently drained their personal checking account. Let’s imagine they had a lot of recurring bills due on this specific day. This means they do not have the required funds to fund their new bank account, but the file was already sent to the Fed! 

Step 03: Since the timeline for communication between the ODFI and RDFI via the NACHA network usually takes two business days or sometime more, the original transfer request continues as is, and the funds are deposited into the User’s new bank account. 

Step 04: After two business days, the RDFI (the neobank) receives a Return Code from the ODFI (Chase): R01 - Insufficient Funds. The RDFI is now required to return the funds. This assumes the User didn’t deposit their funds and immediately spend them or withdraw them. 

Partnering with Astra to Prevent Returns

By partnering with Astra, you gain more control over your ACH payments (and, therefore, your return rates). 

Some of the benefits of Astra include: 

• Accelerated ACH that makes ACH payments happen faster and reduces the time from initial request to payout

• Enhanced fraud detection to help flag payment requests that are unlikely to be honored by the customer’s bank

• Automated balance checking to ensure the customer can cover a payment request

• Automated updates on the transfer status via webhooks, so you get real-time information and don’t have to wait days or weeks to learn about a returned payment 

Astra’s high resolution risk mitigation solution implements real-time dynamic settlement speed decisioning that optimizes for throughput, while reducing origination risk (return codes). 

How Can You Track Return Codes? 

Astra has advanced security controls that significantly reduce fraud by 100x better than legacy

vendors. Even for the most sophisticated programs, ACH Returns will happen. In the event an ACH Return is raised, you can utilize the following resources to track and manage them: 

• User Webhooks: for tracking User object status changes, such as from approved to suspended. This can occur when we receive R10 Return Codes. 

• GET User: this resource will return all details about the User object, including the status of the User and why their status change (e.g. if they were suspended) 

• Transfer Webhooks: for tracking Transfer object statuses changes, such as from processed to failed. This can occur when a User’s transfer fails because of a Return Codes. 

• GET Transfer: this resources will return all details about the Transfer object, including the status of the Transfer (e.g. failed) and the specific Return Code (e.g 51 - Insufficient Funds) 

• Transfer Segments resource: for tracking which specific leg of a Transfer object (the Debit or Credit) resulted in a return code. This can help team fold track positive or negative balances (more information below).  

• Guide to Routines, Transfers, and Webhooks: This articles outlines when webhooks are triggered in relation to status changes for Routines & Transfers. With ACH Transfers, a Transfer can have a status of processed, which then transitions to a status of failed, if a Return Code is later received.

• Transaction and ACH Return Reports: via your Astra Dashboard DataHub, Astra provides a downloadable report for all transactions, and an ACH Return report, both of contain details on transfers that experienced a return code. Please note that the transactions report does not include the specific return code. The ACH Return report does contain additional details on each return.

• The Ultimate Guide to ACH Return Codes: this blog post includes information about return codes, how they happen, and all the various kinds of return codes that can be issued.  

Negative vs. Positive Balances

The following outlines how an ACH Return Code can result in a net zero, negative, or positive balance for your program: 

1. Net Zero Balance: A Return can be received on the ACH debit before the ACH Credit is created. In this scenario, Astra cancels the ACH Credit and there is neither a positive nor negative balance. In other words, no funds were debited from the source account and no funds were credited to the destination account. 

2. Negative Balance: A Return can be received on the ACH debit after the ACH Credit has been processed. In this scenario, there is a negative balance as the funds have been credited to the destination account, but the debit from the source account failed and the funds from the debit are absent. 

3. Positive Balance: A Return can be received on the ACH Credit after the Transfer has been processed. This usually means the funds are returned to Astra because the account has been closed, is frozen, or has exceeded its allowable daily, weekly, or monthly depository limit. In this scenario, the User is missing their funds. Please contact Astra for further assistance.