ACH vs. Wire Transfer

Living in the digital age translates more and more to switching from paper to wireless. And when transferring money between businesses or individuals, electronic solutions seem the way to go.

In fact they’re greatly favored over paper checks, as the money takes less time to move, is transported safely, (therefore isn’t lost in the mail), and transaction records are easily preserved.

You may ask, though, which method is best for me or my business.

When searching for ways to transmit electronic payments, you may come across what is referred to as ACH (Automated Clearing House) as well as wire transfer techniques, and it's easy to confuse them. What distinguishes one from one another, you ask?

Indeed, understanding the differences between the two approaches can help you make a wise choice.

Automated Clearing House (ACH)

When funds are sent between banks or financial institutions with the aid of a payment processor, the transaction is known as an ACH payment. Through a nationwide network, ACH transfer payments are processed by clearinghouses. A clearinghouse is a type of financial organization created to enable individuals or businesses to trade payments or securities. The network processes the payments in "batches."



The bank or credit union receives its ACH payments in a batch once they’ve been processed, and then they must assign each deposit to the proper bank account. No human is involved in the batching or distribution; the entire process is accomplished digitally.

Wire Transfers

Wire transfers are another way in which to electronically send money to an organization or individual. To transfer money, you must know the name of the recipient's bank in addition to their account and routing number. Alternatively, you can send it to another wire transfer destination, in which case you wouldn’t need all of the recipient's banking information, but instead just their name and the name and location of the final destination.

Differences Between Them

Security

Both forms of transfers provide security precautions that are unavailable when sending a paper check.

Typically, between the two, ACH transfers are seen as safer. Indeed, due to strict clearinghouse processing rules, money sent in this manner is first sifted through extra precautionary measures and regulations.

In the case of fraud or error, ACH transactions can be halted, while wire transfers are final once the money is received. Because of this, with wire transfers, it’s critical that you’re sure of who the money is going to.



Overall, though, wire transfers are still regarded as secure electronic transactions as long as all the supporting information provided is accurate.

Processing speed

The transfer of funds via wire is rapid, so you frequently get access to the money the same business day, though it may sometimes depend on the size of the transfer. When sending money overseas, however, it can take an extra day or two for the money to become available in the recipient's account.



ACH transfers are typically complete in one business day, tending to process a bit more slowly than wire transactions. This is because ACH payments are handled by banks and clearinghouses collectively rather than individually, and also because they’re processed in batches.

Cost to Transfer Money

If you’re on the receiving end of the money, ACH and wire transfers are typically free, though with wire transfers, some banks may charge a small fee.

When it comes to sending money through wire transfer, banks, credit unions and other financial institutions charge anywhere from about $10 to $35, and international wire transfers might be even more expensive.



Consumers almost never pay for ACH transfers, but there might be a charge for transfers to other banks.

Consider ACH-based applications like Venmo or Cash App, where sending money is free. It will only cost if you choose to immediately transfer the money into your bank account instead of waiting 1-3 business days. Businesses and organizations that utilize ACH for bill or payroll payments might be required to pay for this service, but the transaction fees are typically very low, usually less than one dollar per payment.

Which Option Is Best?

ACH transfers and wire transfers each fulfill the same purpose but with distinct differences depending on your circumstances.

When speed is the priority, wire transfers are the best choice because of their fast processing time. When dealing with larger amounts of money, it may also be better to use wire transfer. For example, consider business owners looking to make a down payment on a building or pay their suppliers.

The recipients of the money, for their part, typically feel better with this method too, as they can be more confident that the money is actually available. In addition, ACH transfers only apply domestically, so if you need to make an international payment, wire transfers are your best bet.

For smaller, more frequent transactions, ACH payments work well and can be used to make recurring payments. They’re perfect if you’re seeking an easy way to make electronic payments.



Known to many in the work world, employee payments (direct deposits) are made through ACH transactions.