Table of Contents
When a Credit Payment Breaks the Rules
ACH payments are trusted for moving money safely and efficiently between accounts, whether you’re paying employees, issuing refunds, or transferring funds between businesses. But for ACH transactions to work properly, they must follow strict formatting and use rules.
If you try to send a credit entry that doesn’t meet ACH standards—whether because of the account type, the transaction setup, or the entry class—you may get it bounced back with ACH Return Code R36.
Let’s dig into what R36 – Improper Credit Entry means, why it happens, and how to fix it quickly.
What Does ACH Return Code R37 Mean?
ACH Return Code R36 stands for:
“Improper Credit Entry.”
Here’s NACHA’s official definition:
R36 – Improper Credit Entry: A credit entry was made that does not conform to NACHA rules regarding the use of credit entries.
In plain terms: the receiving bank reviewed the ACH credit and determined that the transaction violated ACH regulations—often because it was sent to an account that can’t accept that type of payment or the credit entry itself was improperly formatted.
Common Reasons for R36 Returns
ACH Return Code R36 can show up for a few reasons:
Sending a credit entry to an account that only accepts debits (like a loan account)
Using the wrong SEC code (Standard Entry Class) for the type of credit you are sending
Formatting errors in the way the credit entry was structured
Credit sent where a debit was required under the transaction type rules
Violation of use-case rules (for example, sending a credit where specific authorization processes weren’t followed)
This return typically points to an error in the payment’s structure, not a refusal from the customer or account holder.
How to Handle ACH Return Code R36
If you receive an R36 return, here’s what to do:
1. Review the Returned Transaction
Look at the details of the payment that triggered the return. Check:
The account type
The SEC code used
The intended use of the payment
2. Verify Account Eligibility
Confirm that the receiving account can actually accept ACH credits. Certain types of accounts (like loan repayment accounts) may only allow ACH debits—not credits.
3. Correct the SEC Code or Transaction Format
If the issue is related to the entry format, you may need to reprocess the payment using the correct ACH entry class (such as CCD, PPD, or CTX depending on the situation).
4. Contact the Customer or Recipient (If Needed)
If you’re unsure why the payment was rejected, ask the customer to confirm whether their account can accept ACH credits or whether they prefer another method.
5. Resubmit Correctly
After fixing the formatting or payment instructions, you can resubmit the transaction.
How to Avoid R36 Errors in the Future
While R36 returns aren’t the most common ACH errors, they can be prevented by following a few best practices:
Confirm account type and payment type compatibility when setting up customers or vendors
Use software that validates ACH entry formats automatically
Train your team on when to use different SEC codes like PPD (consumer payments) or CCD (business payments)
Double-check authorization and usage rules before sending large or unusual ACH credits
Work with a knowledgeable ACH provider who can help review your transaction setup if needed
Getting the right information at the beginning of the payment setup process can save you from returns and processing delays later on.
Get ACH Processing With Durango
ACH Return Code R36—“Improper Credit Entry”—means your ACH credit didn’t meet the network’s rules, often due to the wrong account type, SEC code, or formatting mistake. It’s not a customer-initiated rejection—it’s a technical compliance issue that needs to be fixed before resubmitting.
At Durango Merchant Services, we help businesses fine-tune their ACH processes to reduce errors, stay compliant with NACHA rules, and keep payments moving smoothly. Whether you’re handling standard payroll or complex corporate transactions, we’re here to help.
