ACH vs. Wire Transfer: Key Differences and Benefits

Jun 15, 2023

ACH and wire transfer are two of the most popular ways to move money and neither requires a credit or debit card. These two methods, while similar in their digital nature, differ in their mechanisms, costs, speeds, security measures, availability, and more.

What is ACH?

ACH, or Automated Clearing House, is a network used for electronic money transfer between banks. Essentially, an ACH transfer pulls funds from one bank account and pushes them into another. It’s often used for direct deposit by employers, automatic bill payments, and transferring money between personal bank accounts.

The ACH network is regulated by Nacha, formerly the National Automated Clearinghouse Association, who determines how funds move between financial institutions.

What is Wire Transfer?

A wire transfer is a method of electronic transfer where funds are moved from one person or entity to another through a network of banks or nonbank transfer services, like MoneyGram or Western Union. Unlike ACH transfers, which are processed in batches, wire transfers are processed individually and therefore are typically quicker.

Wire transfers are managed by the Federal Reserve Wire Network, or Fedwire for short, who manages transactions between financial institutions. While, you may not hear about them as much, wire transfer remains a popular way to send money. There were nearly 200 million wire transfers for $1 billion were initiated in 2022.

The Differences Between ACH and Wire Transfer

Cost

ACH: With ACH transfers, the cost to the sender is usually minimal or even free, especially for consumers.  However, businesses pay to send or receive ACH payments. The cost typically ranges from a few cents to a couple of dollars per transaction. Expedited payments may also incur a fee.

Wire transfers are usually more costly. Most banks charge between $15 and $50 for sending and receiving wire transfers domestically. International transfers may cost up to $65. Fees for nonbank transfers vary by provider and are often based on the amount of the transfer.

Speed and Timing

ACH transfers typically take one to two business days, but there is growing ability for same-day transfers. Transactions are batch-processed by the network operator, which can lead to some delay. ACH payments made over the weekend or on a bank holiday may take longer to process.

Wire transfers are usually processed within the same day when requests are made by the bank or provider’s cut-off time. Cross-border wire transfers can take a bit longer, usually around one to five business days, depending on factors like the recipient’s country and currency.

Security

ACH transfers are considered safe and secure because they move through a regulated network. There’s a small window to cancel accidental transactions before they’re completed. Additionally, in case of an error or fraud, consumers generally have 60 days to notify the bank.

Wire transfers offer secure transactions, especially since they are typically conducted between banks. However, once a wire transfer has been delivered to the recipient’s bank, it can’t be reversed. If the transfer was made fraudulently, the chances of recovering the funds are slim.

Availability

ACH transactions are available both domestically and internationally, though international transactions may have an additional fee. You can make an ACH transaction any time, but transactions are only processed on business days.

Wire transfers can be made anytime during the bank or provider’s business hours, and availability extends internationally. Cut-off times, holidays, and weekends can still affect transfer times.

Limits

ACH transactions are subject to bank limits on both the number of transfers and amounts that can be sent and received in a day, week, or month. Merchants who receive more ACH payments than usual may have to contact their payment processor to raise their transaction limits.

Wire transfers also have limits from the bank or service provider, but they’re typically much higher than limits for ACH payments. This makes wire transfers a good option for large transactions, especially when the funds are needed quickly.

Which is Better?

From a payment perspective, ACH transfers are advantageous due to their low cost, security, and the ability to set up recurring payments. However, their main downside is the slower transfer speed, and potential complications for international transactions.

Wire transfers are advantageous because of their speed, especially for larger amounts or international transfers. But they’re not the best option for everyday payments. You have to contact the bank or service provider to set one up, they’re more expensive, and once a transfer is made, it can’t be reversed.

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