ACH Return Code R20: Top 3 Reasons & Fixes in 2024

ACH Return Code R20 can be a significant thorn in the side of financial institutions, indicating that a transaction to a receiving account has failed because it is a non-transaction account. This means the account in question doesn’t permit electronic transactions like ACH debits or credits.

We’ll explain what ACH Return Code R20 means and provide steps on how to handle it.

Quick Facts:

• ACH returns: These are reversals of electronic payments.
• ACH return codes: Specific codes that identify the reason for payment failure.
• Return Code R20: Indicates a non-transaction account.

Navigating ACH returns can be complex, but understanding return codes is the first step towards smooth financial transactions. ACH codes help banks communicate why a payment was rejected, making it easier to resolve issues quickly.

Let’s dive deeper into ACH Return Code R20 and how to handle it to minimize disruptions in your payment processes.

What is ACH Return Code R20?

Definition of ACH Return Code R20

ACH Return Code R20 stands for “Non-Transaction Account.” This code is used when an ACH transaction is rejected because the receiving account is not designed for regular transactions. Non-transaction accounts, like certain savings accounts, have restrictions on electronic debits and credits.

When a bank processes an ACH file and encounters a non-transaction account, it rejects the entry and sends back an R20 code. This helps both the originating and receiving financial institutions quickly identify the issue.

Common Reasons for ACH Return Code R20

Account Restrictions: Many non-transaction accounts are restricted by regulations or bank policies. For example, Regulation D limits the number of certain types of withdrawals from savings accounts, making them unsuitable for frequent ACH transactions.

Transaction Limitations: Some accounts are not set up to handle electronic transactions at all. These accounts might be designed for savings, investments, or other purposes where transactions are infrequent.

Receiving Account Issues: If the receiving account has specific restrictions that prevent ACH debits or credits, the transaction will be rejected with an R20 code.

Understanding these common reasons can help you take proactive steps to avoid ACH Return Code R20. For instance, always verify the type of account before initiating an ACH transaction.

Next, we’ll discuss how to handle ACH Return Code R20 effectively and prevent future occurrences.

How to Handle ACH Return Code R20

Dealing with ACH Return Code R20 can be straightforward if you follow some key steps. This section will guide you through resolving and preventing these issues.

Steps to Resolve ACH Return Code R20

1. Contact the Customer:

2. Reach out to your customer as soon as you receive an R20 return code. Explain why the transaction failed and ask if they have another account that can accept ACH transactions.

3. Verify Account Type:

4. Confirm with the customer that the new account is a transaction account, such as a checking account, which allows electronic debits and credits.

5. Update Payment Information:

6. Once you have verified the correct account type, update your records with the new account information. Ensure that the account and routing numbers are accurately entered.

7. Alternative Payment Methods:

8. If the customer does not have a suitable account for ACH transactions, discuss other payment options. These could include credit card payments, wire transfers, or even checks.

Preventing Future ACH Return Code R20 Issues

1. Account Verification:

2. Implement a process to verify the type of account before initiating ACH transactions. This can help you identify non-transaction accounts early and avoid transaction failures.

3. Customer Education:

4. Educate your customers about the types of accounts that can accept ACH payments. Providing clear information can help them choose the right account for these transactions.

5. ACH Transaction Policies:

6. Establish and communicate clear policies for ACH transactions. Make sure your team and your customers are aware of these policies to prevent errors.

7. Regular Communication:

8. Maintain regular communication with your customers to ensure their account information is up-to-date. Periodically confirm that the accounts they use for ACH transactions are still valid and suitable.

By following these steps, you can effectively handle ACH Return Code R20 and minimize future occurrences. This proactive approach will help ensure smoother financial transactions and better customer satisfaction.

Most Common ACH Return Codes

R01 – Insufficient Funds

R01 means the customer’s bank account doesn’t have enough money to cover the transaction. This is similar to a bounced check.

What to do:

• Retry the transaction: You can try the payment again up to two more times within 30 days.
• Contact the customer: Ask them to ensure enough funds are available or arrange a different payment method.

R02 – Account Closed

R02 indicates that the customer’s bank account has been closed. Any future ACH payment attempts will also fail.

What to do:

• Get new payment details: Contact the customer to obtain new bank account information or a different payment method.
• Verify account status: Ensure the new account is open and active before resubmitting the transaction.

R03 – No Account/Unable to Locate Account

R03 means the account number or routing number entered doesn’t match the customer’s name or the account doesn’t exist.

What to do:

• Verify account information: Double-check the routing number, account number, and customer name.
• Correct and resubmit: If you find an error, correct it and submit the payment again. You may need to confirm the details with the customer or ask for a voided check to verify the information.

By understanding and addressing these ACH return codes, you can resolve issues quickly and ensure smoother transactions.

Frequently Asked Questions about ACH Return Code R20

What is the R20 response code?

ACH Return Code R20 is a specific code used to indicate that an ACH transaction has been rejected because the receiving account is a non-transaction account. Non-transaction accounts are typically savings accounts or accounts that have restrictions on electronic debits or credits. These accounts are not designed for regular transactions, so any attempt to process an ACH payment will result in a rejection.

What is R20 in banking?

In banking, R20 is a return code that signifies an issue with the type of account being used for an ACH payment. Specifically, it means that the payment was attempted on a non-transaction account. These accounts don’t allow electronic transactions, making them unsuitable for ACH payments. When this happens, the receiving bank will reject the transaction and return it with an R20 code.

What are the ACH return codes?

ACH return codes are standardized codes used to indicate the reason why an ACH transaction has been returned by the recipient’s bank. Each code starts with an “R” followed by a two-digit number. These codes help both the originating and receiving financial institutions to quickly identify and communicate the reason for a payment failure.

Here are some common ACH return codes:

• R01 – Insufficient Funds: The account doesn’t have enough funds to complete the transaction.
• R02 – Account Closed: The account has been closed and can no longer receive transactions.
• R03 – No Account/Unable to Locate Account: The account number or routing number entered is incorrect or doesn’t exist.
• R20 – Non-Transaction Account: The account used does not allow ACH transactions.

Understanding these codes can help you quickly identify the issue and take the necessary steps to resolve it. For a comprehensive list of ACH return codes, you can refer to resources like the Nacha Tech website.

By familiarizing yourself with ACH return codes and their meanings, you can better manage transaction errors and ensure smoother payment processes.

Conclusion

Navigating the complexities of ACH return codes can be challenging, but understanding them is crucial for smooth financial operations. ACH Return Code R20, which indicates a non-transaction account, is just one of many codes that can disrupt your payment processes. By knowing what these codes mean and how to address them, you can minimize delays and maintain strong customer relationships.

At NachaTech, we specialize in ACH file validation and financial technology solutions that help businesses handle these issues efficiently. Our ACH payment solutions offer tools to validate account information, reducing the likelihood of encountering return codes like R20.

Why choose NachaTech?

• Error Handling: We provide robust tools to identify and correct errors in ACH files before they become problems.
• Raw Line Editing: Our software allows for detailed editing, ensuring compliance with NACHA standards.
• Fast Validation: With an embedded ABA database, we quickly validate ABA numbers to prevent failed transactions.

By leveraging NachaTech’s advanced features, you can streamline your ACH processing, reduce administrative burdens, and focus on what matters most—growing your business.

For more information on how we can help you manage ACH return codes and improve your payment operations, visit our ACH payment solutions page.