ACH and wire transfers are both ways to move money from one bank account to another. Your business might use either one to pay a supplier, an employee, or anyone else you owe money to. Or vendors might issue payment for goods or services through one of these two methods.
In some ways, they each provide a similar service, but the difference between them is important. Each service has different advantages when it comes to the way they operate, the speed of payment, fees for the transaction, potential risks, and how businesses can best use them. This article covers what you need to know about the differences between ACH transfers and wire transfers.
What’s an ACH transfer and what does it stand for?
An ACH, or automated clearing house, transfer is a way to move funds from one bank account to another within the United States.
The ACH banking network includes the Federal Reserve and is managed by the National Automated Clearing House Association (NACHA).
Once initial approval for an ACH transfer is received, the funds move from the original bank to a central clearing house called the Automated Clearing House network. If the clearing house approves the transaction, the cleared money is then posted to the destination bank and deposited for the individual recipient to use.
When to use ACH transfers
With so many new forms of electronic payment options, from apps like PayPal to digital e-wallets, it can be hard to figure out what’s best to use when. At a high level, there are a few guidelines that apply when considering ACH vs wire transfers:
ACH transfers usually cost a lot less
ACH transfers can be used either to send or “pull” funds, meaning you can use them to pay vendors or merchants, to deposit corporate paychecks directly into checking accounts, or to receive funds from customers and clients (with their authorization)
ACH transfers sometimes have a longer processing window (but not always)
What’s a wire transfer?
A wire transfer also moves funds from one bank to another. It's similar to an ACH transfer, but it doesn't involve a clearing house. Instead, other banks act as intermediaries to the transaction.
When to use Wire Transfers
Generally speaking, when it comes to ACH vs. wire transfers, ACH payments are a lot more common, much cheaper, and a bit more secure. For all those reasons, outlined in more detail below, it’s usually better to make business payments by ACH than wire.
Still, wire has advantages over ACH in certain situations:
International wire transfers are common for cross-border payments
The rules for ACH transfers limit same-day amounts
Wire transfers have traditionally been used for large one-time payments that need to be processed on a given day—like real estate transactions or estate settlements—to assure the transfer of funds in something approximating real-time payment
What’s the difference between an ACH transfer and a wire transfer?
If you want to dig deeper, here are the specific differences between ACH vs. wire transfers:
ACH Transfer Processing Times
ACH transfers can require 2 to 3 days to complete. It takes this long because banks and clearing houses usually handle these transfers in batches, waiting until enough of them are received before reviewing them.
But the ACH system is working toward making funds available more quickly. Some ACH payments are already eligible for same-day action.
Wire Transfer Processing Times
How long do wire transfers take? Usually a day or less. Often the money can be debited, credited, and released for use almost immediately.
This quick availability is one of the major benefits associated with a wire transfer.
ACH Transfers: Costs and Fees
ACH transfers are typically free, at least for the recipient (or payee). Payers are usually charged less than a dollar.
Of all the payment types, ACH is one of the cheapest ways to pay a vendor invoice, an employee paycheck, or anything else.
Wire Transfer: Costs and Fees
The terms of a wire transfer are a lot more expensive for both parties. Both the senders and receivers of wire transfers are usually charged a fee.
It's not uncommon for financial institutions to charge between $10 and $35 to wire money.**
In addition to the sender fee, some institutions – especially smaller ones – charge a small fee to receive wired money.
Payment Security in ACH Transfers: Is it safe?
In addition to their convenience, ACH transfers are considered very safe. In fact, businesses often use ACH to pay one another specifically because of the added security benefits.
Companies also use them to deposit wages directly into an employee's personal checking account or to collect automatic customer payments, a service that can be offered to each individual customer as a convenience without being required.
Sending money from one financial institution to another through the clearing house network requires a clearing process that verifies the funds through a kind of “middleman bank.”
This independent verification process is automatic, but it adds an extra layer of security to these digital payments.
The batching and verification process initially required an extra day or two, but that added security is now becoming quicker, sometimes letting ACH funds become available the same day.
Payment Security in Wire Transfer: Is it safe?
Wire transfer is also generally considered secure. Both ACH and wire transfer are efficient systems of digital fund transfers that can be used for business-to-business payments. And both are safer than paper checks, which are subject to check fraud.
Assuming those funds are being sent domestically, from one U.S. bank to some other U.S. financial institution (to compare apples to apples), ACH can be somewhat safer vs. wire transfers for a few specific reasons:
ACH vs wire: verification of info
ACH is usually set up ahead of time, with verification of account and routing numbers
With wire transfers, a simple mistake like transposing 2 numbers in the initiating paperwork can cause the funds to go to the wrong account
ACH vs wire: reversibility
ACH transfers can sometimes be reversed in case of errors
Wire transfers work more like email — once sent, they can’t be unsent
ACH vs wire: speed of funds release
ACH transfers will often appear as “pending” while they’re still clearing in the system — this allows time to try to reverse the process before funds are released
Wire transfer funds are released immediately, in something close to real-time payments — funds can be spent right away and reversal is impossible
What's the difference in security between ACH and wire transfer? Security is always a concern when money is processed via electronic channels, but keep in mind that online banking tends to be safer than using physical checks.
For either ACH or wire transfers, you might need to provide specific information, including bank names, account numbers, and routing numbers. This information can be used to steal funds from your account, so make sure that you trust the recipient, the system, and the service provided before supplying this information.
Sending money using a wire transfer is riskier than receiving money that way.
Once initiated, a wire transfer usually can't be changed. Mistakes can't be reversed since the money is immediately available to spend. Again, trust is important here.
Receiving money through a wire transfer is practically risk-free since the balance is paid quickly. You can withdraw that income immediately and use it for any purpose without any limitations.
Unlike wire transfers, ACH payments are a bit more protected. They're
On the other hand, that means a transfer made into your account from another source might also be reversed, leaving you without the cash you thought you had coming in.
How can my business take advantage of these payment options?
One way to take advantage of ACH is to set up recurring payments as ACH transfers in Bill.com. For example, if you need to make monthly payments to a supplier, you might use ACH transfers to keep that flow of payments going automatically.
Any series of recurring payments can be scheduled in advance for ACH processing, but Bill.com makes one-time approvals easy too.
The main use of wire transfers is for the speedy delivery of large payments, usually for a large purchase or billable service requiring same-day or next-day payment. They aren't often used for repeat or serial payments—unless those payments are international.
Wire transfers are great for paying international vendors but often come with hefty fees or other hidden charges when made through a bank. With Bill.com, however, there's no wire transfer fee* for payments to vendors in local currencies.
Want an easy way for your business to make or collect ACH payments and send wire transfers whenever you need to? Visit Bill.com for more information on getting the benefits of fast, secure, and reasonably priced payment transfer options.
* Local currency payments only. Subject to restrictions. Other fees may apply.
** Based on the average published outgoing international wire transfer fee charged by the top 10 U.S. banks according to the FDIC, for payments in local currencies. This fee excludes currency conversion rates.