An electronic transfer is one of the best options for sending and receiving money for small business and personal use. It tends to be a safer option than sending funds by mail and is much easier to track. Plus, it’s a quicker option than going the “old school” paper route.  Two of the best options for sending electronic transfers are ACH and wire transfer which this guide will compare ach vs wire transfer. There are three key differences between the different electronic ways to send money you should know.

What is an ACH Transfer?

ACH stands for Automatic Clearing House and is a type of bank-to-bank electronic money transfer that goes through the Automatic Clearing House Network. The ACH network is a processing system used by financial institutions to group together transactions that need to be processed. Typically speaking, these transactions are processed three times per business day. When sending money using an ACH, you are making a direct payment, when receiving one, you are getting a direct deposit. 

Many people use ACH transfers without realizing, for example, if you receive a direct deposit for your paycheck, that is an ACH transfer. Another example would be when you pay your utility bills online using your bank account. Business owners also use ACH transfers to pay vendors. Many businesses and government entities use ACH transfers for things like paychecks, tax refunds, and government benefits.

What is a Wire Transfer?

A wire transfer is also a type of electronic money transfer. These transfers can be bank-to-bank using a network like SWIFT (Society for Worldwide Interbank Financial Telecommunication). Here, the sender’s bank transfers funds through the network using a secure electronic system to the receiver’s bank. 

If you’re sending money internationally, wire transfer is usually the way to do it. These transfers are known as remittance transfers. These days customers can transfer money internationally through non-bank providers like Wise or Western Union

The 3 Differences Between ACH vs Wire Transfers:

There are some key differences between ACH and wire transfers. Typically, both can be arranged online, but that may depend on the bank you use. Wire transfers are usually preferable when you need to ensure accuracy and speed. For example, if you’re sending a large amount of money to put a downpayment on a home. ACH payments, on the other hand, are better when making smaller but more frequent payments. For example, if setting up automatic recurring payments for bills. 

Transfer Speeds

It takes approximately one business day for a wire transfer to go through, and in many cases, the money will be available for use that day. The majority of the time, the wire transfer process is automated, but in some cases, it will need to be reviewed by a banker before arriving in the receiver’s account. International wires can go through the same day, but they may take an additional 1 – 2 business days. For these reasons, it’s best to leave plenty of time when sending a wire transfer.

As mentioned previously,  ACH transfers are processed in batches up to three times per business day. So Many payments are eligible for same-day delivery. 

Safety

When sending money, there is always a risk associated no matter what, but the risk is much lower if you’re on the receiving end. When sending money using a wire transfer, the bank will not send any funds unless the money is already in the sender’s account. 

This is a primary reason why they are the preferred method for large payments such as a down payment on a house. The money will be removed from the account immediately upon processing. When receiving a wire transfer, the money can be withdrawn as soon as the payment goes into their account because it’s considered to be cleared money. If you receive a wire transfer, it’s safe because it’s certain that the money was in the sender’s bank account to begin with. However, to ensure this, make sure that the money is being delivered via a genuine wire transfer service. 

When sending a wire, be absolutely certain that you are sending it to the right destination, as they are usually irreversible. 

ACH transfers, on the other hand, can be reversed. But there are certain rules and regulations that apply when a bank authorizes the reversal of an ACH transfer. You will likely have to prove that the transfer was either a genuine mistake or fraud. 

One of the biggest security risks with both types of transfers is that you need to supply sensitive information such as your routing number and account number, which can lead to fraud or theft if they fall into the wrong hands. 

When it comes to wire transfers the risk lies mostly with the sender and not the receiver. Wire transfers are the preferred method for large payments like the down payment on the house because the bank won’t process the funds unless the money is in the sender’s account. When the receiver gets a payment from a wire transfer they have instant access to the funds because it’s considered to be cleared money. 

The best way to remove the potential risk of sending a wire transfer is to make absolutely sure you’re sending it to the correct destination because it is usually irreversible. 

Unlike wire transfers, ACH transfers can be reversed. But there are certain rules and regulations that apply when a bank authorizes the reversal of an ACH transfer. You will likely have to prove that the transfer was either a genuine mistake or fraud. 

One of the biggest security risks with both types of transfers is that you need to supply sensitive information such as your routing number and account number, which can lead to fraud or theft if they fall into the wrong hands.

Cost Differences to Send and Receive

Typically speaking, it will cost you anywhere from $10 to $35 to send a wire transfer domestically within the U.S. International transfers, will be more pricey. Usually, you will always be charged a fee when sending a wire transfer but receiving one is usually free, although some credit unions or banks might charge a very small receiving fee. It should also be noted that transferring funds by credit card is much more expensive. 

ACH transfers are almost always free whether you’re the sender or the receiver. Some person-to-person payment services might charge a small fee, but this is typically only around $1. For businesses, there might be fees associated with paying wages or accepting payments for bills and such. 

Should you use an ACH or wire transfer? 

Ach vs wire transfer, what service you choose to use will usually depend on what you need to send or receive money for, and because of this, most people use both services at different times. For situations that involve large, one-time payments, it’s best to use a wire transfer as it involves proof that funds are already in the sender’s accounts. 

because of the fees associated with wires, ACH transfers are a better option for frequent, small payments or sending money between friends, family, and acquaintances. 

Whether you use an ACH or Wire transfer, if you have a business it’s important that you keep your business expenses and personal expenses separate. Set up a business bank account that allows you to do that.  This will protect your personal assets in case of an audit or other legal concerns.


Frequently Asked Questions

Is ACH the same as Swift?

No. SWIFT is a network used to send a wire transfer, whereas an ACH transfer typically goes through the Automatic Clearing House Network. 

Which is better ACH or wire transfer?

Both ACH transfers and wire transfers have their benefits and may be more applicable in different situations. No one is better than the other, it just depends on the user’s preferences and, sometimes, on what form of electronic transfer the receiver will accept. For businesses sending direct deposits for paychecks, for example, ACH transfers might be better. For sending large quantities of money that require proof of funds, a wire transfer will likely be the only form of electronic transfer that is accepted.