ACH vs. Wire Transfer: What's the Difference? (2024)

Table of Contents: What is an ACH Payment? | What Does ACH Stand For? How Does ACH Work? | How are ACH Transfers Most Commonly Used? | What is an ACH Transfer? | What are the Key Differences Between ACH and Wire Transfer? | Differences Between ACH Routing and Wire Routing | Choosing the Right Payment Method | How Long Does an ACH Transfer Take? | How Long Does a Wire Transfer Take? | Cost of ACH vs. Wire Transfer | Payment Security for ACH vs. Wire | Common Uses of ACH Payments | How Can My Business Take Advantage of These Payment Options?

Today, both consumers and businesses have a wide array of options for paying their bills with accounts payable software. One of these options is whether to conduct payments via ACH network vs. wire transfer.

This article will address the details of how ACH and wire transfers work, and the benefits and risks associated with each money transfer type.

ACH transfers and wire transfers are methods of moving funds from one bank account to another. They may seem similar. However, the two are quite different, and understanding the differences between them is beneficial for anyone who is interested in using electronic methods of payment for moving money to and from bank accounts.

During ACH transfers, information is sent in a batch to the automated clearinghouse, which clears the payments through and then sends them on to the bank. The clearinghouse is essentially the middleman in this process.

Wire transfers also transfer funds from one account to another, but instead of the clearinghouse, banks act as middlemen. They typically charge a processing fee ranging from $10 to $30, while ACH transfers are usually free.

The key differences between ACH routing and wire routing is ACH routing uses a clearinghouse network for batch processing in days while wire transfers work by directly transferring funds between banks almost instantly. Other differences include:

• Payment Information: ACH payment routing information includes the bank routing number and account number. For wire routing, in addition to routing and account numbers, require more detailed information like the recipient’s full name, address, and reason for payment.
• Reversibility: ACH payments can be reversed in cases of errors or fraud, subject to conditions. Wire transfers are generally final and irreversible once processed.
• Maximum Limits: ACH payment routing has limits on maximum transaction amounts. Wire transfers can accommodate higher transaction limits.

Automated Clearing House (ACH) transfer is an electronic payment method used to send and receive money quickly and securely. It is a convenient way to transfer money between bank accounts, making it a popular choice for businesses and individuals.

An ACH transferis a convenient and cost-efficient way to make payments and transfer money electronically. This type of payment system is becoming increasingly popular as an alternative to paper checks and traditional bank transfers (domestic wire transfer).

An ACH transfer can often take two to three business days to complete. They take a longer time to clear because they are processed by banks in batches.

In 2017, theNational Clearinghouse Association(NACHA) launched Same-Day ACH transfer. In September 2022, NACHA announced new requirements and updates for companies and customers using Same-Day ACH, extending the payment submission time by two hours on business days, increasing the transaction cap to $100,000 and facilitating faster access to funds.

Wire transfers send the funds along almost immediately. There is usually no hold on funds received by wire transfer, so the recipient can access it right away at the receiving bank.

Some ACH payment providers charge a flat fee ranging from $0.20 to $1.50 per transaction. Businesses may also have to pay a separate fee of $5-30 per month just for using ACH. There are other potential charges such as return fees ($2-5 per return), reversal/chargeback fees ($5-25 per instance) and batch fees of less than $1.00.

Wire transfers have processing fees for the sender and the recipient. Many financial institutions charge $10-35 to send. Smaller institutions may charge a fee to receive a wire transfer at the receiving bank. On the high end, those costs can add up to about $55. International wire transfers can cost even more.

ACH payments are attractive from the standpoint of convenience and cost. The more ACH transactions your business performs, the less you typically pay per transaction.

ACH transfers are a bit safer for senders. Unlike most wire transfers, funds can be reversed in cases of fraud or payment error. The criteria for reversals is usually determined by banks.

Wire transfers have little disadvantage for the recipient. When you receive a wire transfer, the funds are accessible immediately.

For senders, there is a little more risk. It’s important to know and confirm the person or account you’re sending money to, because the money can be withdrawn right away and often the transaction cannot be reversed once it is sent.

ACH payments are widely used for several types of transactions beyond just transferring funds between accounts:

• Direct Deposit: Employers commonly use ACH for direct depositing employee paychecks into their bank accounts.
• Bill Payments: Recurring bills like utilities, mortgages, loans can be paid automatically via ACH.
• Business-to-Business Payments: Companies use ACH to pay suppliers, vendors, contractors etc.
• eCommerce Payments: Online merchants increasingly offer ACH as a payment option.
• Tax Payments: Federal, state and local tax payments can be made through ACH.”