All Learning | What is the difference between ACH & Wire Transfer?


What is the difference between ACH & Wire Transfer?


Praveen Sudha

February 9, 2021

The adoption of consumer electronic payments has elevated rapidly in recent times. Individuals and businesses no more prefer cash payments and are switching to non-cash payments, which seems to be a far better and secure approach. And out of the most popular and preferred electronic payment methods, Automated Clearing House (ACH) transfer and wire transfers continue to receive global adoption and usage for carrying out electronic payments by the majority of the people around the globe. 

Though both the payment methods are safe and efficient and facilitate the electronic transfer of funds, there are many notable differences that everyone must be aware of before making a choice between the two. So, let’s discover the major differences between ACH transfers and wire transfers. 

What is ACH & Wire Transfer? 

ACH is an electronic network that enables fund transfers between over 25,000 banks and financial institutions. An ACH payment takes place when money from one financial institution is moved to another, where the ACH payment moves across a national network and enables a clearinghouse for processing. 

A wire transfer is a type of electronic payment that takes place between two banks. Wire transfers are carried out instantly as they need not process via a clearinghouse. Wire transfers don’t need the ACH as a middleman since banks carry out these transfers instantly and funds are transferred electronically from one account to the other. People need wire transfers in case of large dollars purchase like buying a home or paying off a particular loan. 

Differences between ACH & Wire Transfer 

There are notable differences between ACH & Wire Transfer in terms of costs, speed, security, and applications. 

COSTS: When it comes to ACH transfer, sending money from person-to-person is free for the recipient and the receiver usually has to pay $1 per payment. While wire transfers are expensive, banks and credit unions charge around $35 to send domestic wire transfers. In the case of international wire transfers, charges are even higher. 

SPEED: ACH transfers take time as compared to wire transfers. With wire transfers, funds are received in the recipient’s bank account within one business day and there is no hold on money, which implies recipients can withdraw the amount instantly. Major parts of the payments are automated, but there can be delays due to human involvement in authorizing the funds. In the case of international wire transfers, it will take longer as compared to domestic transfers. 

On the other hand, ACH transfers usually take two to three business days to process since banks carry out ACH payments in batches instead of handling them individually. However, improvements are being made continually and there are some ACH transfers that are processed on the same day itself. 

SECURITY: Unlike wire transfers, ACH transfers are considered safer as in case an error or a fraudulent transaction occurs, a transfer reversal is requested. However, wire transfers are riskier since reversals don’t occur in these transfers, which accompanies risk for the senders. 

APPLICATIONS: ACH and wire transfers have a different set of uses. ACH transfers are commonly used by businesses that have to pay employee wages. It is even useful for recurring bills and one-off payments. These transfers tend to have less processing fees, so it turns out to be an affordable option. 

Wire transfers are rapid and are ideal for making a down payment on a property purchase and accompanying other benefits. 

Wish to learn more about ACH and wire transfers? Connect with the expert team at TERA and learn which the ideal choice is for you! 

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