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ACH vs Wire Transfer: Is There a Difference?

Read Time: 5 min

Whether you’re a business owner or a consumer, the process of transferring money can be frustrating and expensive. Fortunately, there are multiple platforms available for money transfers both domestically and internationally. Two of the most popular money transfer options include ACH transfers and wire transfers. When it comes to deciding between ACH vs wire transfers, it’s important to start by knowing the details of each one. Then you can decide which option is best for you. In this guide, we’ll go over the specifics of each platform and compare relevant traits.

What is an ACH Transfer?

ach vs wire transfer

an ACH transfer is a payment routed through the ACH network. At present, there are two types of ACH payment processing: Direct payments and direct deposits. Let’s explore each payment option in more detail below:

ACH stands for Automated Clearing House (ACH) network. This network offers a unique platform for various financial institutions to transfer money. NACHA (the National Automated Clearing House Network) oversees this process to ensure that transactions run smoothly. ACH transactions are grouped on the network and then transferred at pre-determined intervals – there are three transfer times per day.

Direct payments

Direct payments include most transfers made via the ACH network. Both individuals and companies can make direct payments.

An ACH direct payment will trigger a debit on the sender’s bank account and place a credit in the recipient’s account. Venmo, PayPal, and other popular payment options utilize direct payments.

Direct deposits

If a business or government entity sends money to an individual via the ACH network, it is likely a direct deposit. Some examples of this include tax refunds, annuity payments, and other types of general payments.

What is a Wire Transfer?

Now, this wouldn’t be an ACH payment vs wire transfer comparison if we didn’t provide a clear example of a wire transfer. This type of transfer is an electronic payment between two bank accounts. Wire transfers work both internationally and domestically.

Typically, this type of interbank payment will withdraw money from your bank account, which your bank will hold until it transfers the funds to your recipient’s bank. The recipient’s bank will then deposit the money in the corresponding account.

In many ways, a wire transfer acts similarly to a check – except the entire process is digital.

What is the Difference Between ACH and Wire?

If you’re attempting to compare ACH transfer vs wire, it’s essential to consider a broad range of factors. As each type of money transfer has its own strengths and weaknesses, we’ve broken their features down into five key components: Speed, security, cost, availability, and risk. Let’s explore these characteristics in more detail below:

Speed

If you’re a business owner, you’ve likely run into problems when transferring money to individuals or other businesses: Speed can often be a major sore point. If you seek a quick money transfer option, then a wire transfer is likely the best option.

In many cases, wire transfers are available same-day or next-day for domestic transfers. Unfortunately, you might wait up to three days for an ACH transfer to reach the recipient’s bank account.

Still, it’s essential to remember that advances are occurring in the ACH space. Some ACH platforms can offer same-day transfers in specific instances.

Security

difference between ach and wire

Security is a major factor to consider when you’re transferring money to another business or individual. If you’re a scam victim, it’s a good idea to partner with a transfer platform that can reverse a fraudulent transaction.

Unfortunately, wire transfers are very prone to scams – they’re often irreversible. This makes them a popular option for scammers who attempt to dupe business owners and individuals into transferring money domestically or abroad. It’s critical to perform due diligence before any type of wire transfer.

On the other hand, ACH transfers are safety-focused. In many cases, if you suspect fraud, you can reverse an ACH transfer after initiating it (though this will depend on the platform and the specifics of your transfer). If you’re concerned about ACH fraud, refer to our handy guide on the subject.

Cost

If you’ve initiated wire transfers in the past, then you’re likely aware of how pricey they can be. In many cases, wire transfers can cost between $15 and $30, which is only for domestic transfers! Some international wire transfers can cost much more money, depending on your financial services provider.

On the other hand, ACH transfers are often free of charge for individuals. You may notice a small processing fee in some cases, but this will be much lower than anything you can expect to pay for a wire transfer.

Availability

This wouldn’t be a wire vs ACH comparison if it didn’t address the availability of each platform. While both wire transfers and ACH transfers are easily accessible within the United States, wire transfers are the platform of choice for international transfers.

The standard ACH network does not have international compatibility, although the global ACH network has developed the ability to utilize bank-to-bank networks for international transfers.

Risk

As discussed, the risks associated with wire transfers are much higher than with ACH transfers. ACH transfers require extensive information and have the ability to be reversed, so they’re much less suitable for fraud. Not to mention, they run through NACHA and therefore have a vetting process.

Wire Transfer vs ACH: Which is Best?

In the battle between ACH or wire transfers, the winner depends on the transfer’s circumstances. For example, if a business needs to transfer money internationally in a hurry, then a wire transfer is the more suitable option.

Still, with improvements in speed, ACH is quickly becoming the transfer network of choice for many business owners and individuals. ACH payments are secure, low-cost, and widely available within the United States. For domestic transfers, it’s hard to find a reason to use a wire transfer.

The Bottom Line

If you’re debating which type of payment option to use for your business, it’s critical to understand your own needs. If you’re a business that requires a fast, reliable transfer – and cost is not a major factor – then a wire transfer might be suitable.

On the other hand, if you’re hoping to save money on your next transfer – and you can afford to wait until the next business day to receive your funds – then an ACH transfer is secure and affordable.

In some cases, utilizing both of these payment options in different scenarios is a suitable option for a business with diverse money transfer requirements. The winner of wire versus ACH depends on your business’s needs. Regardless, you’re in good hands whichever you decide is right.