Wire Transfer vs ACH

wire transfer comparasion

A Comparison between Wire Transfers and ACH Payments

Wire transfers and ACH payments are two of the most used electronic methods to send or receive funds. They’re essentially similar in terms of application, but as a merchant, you need to understand how they work and what their core differences are so you can decide which option is better suited for your business.

What is ACH?

ACH payments are electronic fund transfers that go through the Automated Clearing House, a huge network of banks batching transfers in the U.S. It has been managed by the National Automated Clearing House Association batches (NACHA) since 1974. Also known as direct deposit, ACH transfers are typically processed in groups.

This payment system allows users to transfer money either by ACH debit or ACH credit transactions. ACH debit transactions involve taking money from a bank account to pay, for example, a recurring bill payment. On the other hand, ACH credit transactions bring money to accounts from various banks. The account can be your own, your family members’ or your friends’.

What is a Wire Transfer?

Wire transfers are fund transfers that go through intermediary banks before finally being sent to the recipient’s bank. They generally require only an account number and a routing number. For international wire transfers, more details are required, such as IBAN and SWIFT/BIC.

Wiring money doesn’t have cross-border limitations unlike sending payments via ACH.

Exploring the Pros and Cons of ACH Payments Vs. Wire Transfers

The differences between ACH payments and wire transfers that happen behind the scenes rarely matter for end-users. What really matters are the differences between these two payment methods when it comes to cost, convenience, and security — factors that can significantly affect your business. Let’s take a look.

  • Cost

If a financial institution declares a transfer free of charge, it’s likely they’re providing ACH payments.

In general, you need to pay a fee when wiring money. Domestic wire transfers can cost from $10 to $30 on average, while international wire transfers cost from $15 to $50. Exchange rates and intermediary fees are also factors that add up to the expense. Sometimes, recipients are also charged.

On the other hand, ACH payments are mostly free for general users. For businesses, however, ACH transactions can cost around $1 or less per transaction.

Tip: Bank wire transfers cost more than ACH payments, but the higher the amount you’re sending, the more negligible the fees are. If you’re paying small amounts, it’s better to use ACH. However, if you’re regularly making high-ticket transactions, wire transfers are the way to go.

  • Ease of Setup

Setting up ACH and wire transfers are almost similar. Before proceeding with the transaction, the bank will ask you to provide certain details, particularly:

ACH Payments

  • The names of the sender and receiver
  • Account numbers
  • The name of the bank where the funds will be received
  • Bank account type (savings or checking)
  • Routing number
  • Transfer amount

Wire Transfers

  • Name and full address of the recipient
  • Name and full address of the receiving bank
  • Recipient’s account number and type (savings or checking)
  • Routing numbers, SWIFT/BIC code, and/or IBAN (whenever applicable)
  • Transfer amount
  • Reason for transfer

As you can see, both transactions require almost the same details. However, this setup process must be repeated every time you send or receive money via wire transfer. By contrast, you only need to provide the necessary information for an ACH transfer once, and upon approval, you can easily continue sending or receiving money regularly.

Tip: ACH transfers are designed with ongoing payments in mind. In fact, ACH payments are commonly used for smaller, recurring payments, such as direct deposits for payroll, subscription-based services, consumer bills, tax refunds, and tax payments. Thus, for recurring billing, use ACH. For one-time, high-value transactions, a bank wire transfer is a better option.

  • Security

Both ACH and wire transfers are lauded for their outstanding security, especially with their long-established connections with partner banks.

However, wire transfers are generally irreversible. Once a transaction has gone through, you may not be able to reverse the transaction should the need ever arise.

On the other hand, ACH payments can be reversed. To do so, you need to submit compelling evidence of transaction error or fraud for the bank to authorize a reversal.

Tip: As a business owner, wire transfers offer prevention if you’re a frequent victim of chargeback fraud. As a consumer, you may need to opt for ACH payments if the ability to file a chargeback means peace of mind.

  • Speed

Settlements via traditional ACH payment can take 2-3 business days to go through. There are some banks that offer next day ACH payment processing, although it’s not that common.

It’s worth noting that ACH transfers also have cut-off times, which means that after a certain time of the day, a transfer won’t be processed until the next business day. For example, if you send money through ACH on a Friday after the bank’s cut-off time, the payment will be processed on Monday next week.

As for wire transfers, their main selling point is fast processing time. Domestic transfers can be as fast as one business day, while international transactions take 2-3 business days.

Tip: Wire transfers are great for quick domestic transactions that aren’t only important, but urgent. If it’s something that can wait for 2-3 days, use ACH.

  • Flexibility

Both ACH and wire transfers have certain limitations when it comes to the transfer amount. ACH payments, in particular, have a daily and monthly cap. Meanwhile, wiring money over $10,000 in the U.S. requires further documentation. Additionally, saving accounts are limited to certain withdrawals to six per month as mandated by U.S. law. All in all, they’re evenly matched in that regard.

Transfer amounts aside, perhaps the only real disadvantage of ACH payments when it comes to flexibility is that they’re usually limited to domestic transfers within the U.S. It’s possible to make an international ACH transfer, but it’s extremely rare.

Tip: When sending funds overseas, go with wire transfers. For domestic transactions within the U.S., you can rely on ACH payments.

Which is Better for Your Business: Wire Transfers or ACH?

In the U.S., ACH transfers make the most sense for domestic, recurring payments. Although they take a bit longer than wire transfers, they are easier to use and cost way less when making ongoing payments to the same recipients.

Elsewhere, wire transfers are best as a rule of thumb when your top priorities are speed, security, and certainty. With wire transfers, transactions are:

  • Faster, taking only 1 day for domestic and 2-3 days for international transfers
  • Irreversible, helping your business avoid chargebacks
  • Less expensive when sending or receiving one-off, high-ticket payments
  • Domestic or global, depending on your current need

At EU Paymentz, we’d be happy to walk you through secure, reliable, and convenient global wire transfer solutions for your business needs. We also offer merchant account services for high-risk merchants, and payment processing for online gambling, Forex, and cryptocurrency. Talk to us to learn more about how we can make payment processing seamless for your business.

Wire transfers and ACH payments are two of the most used electronic methods to send or receive funds. They’re essentially similar in terms of application, but as a merchant, you need to understand how they work and what their core differences are so you can decide which option is better suited for your business.

What is ACH?
ACH payments are electronic fund transfers that go through the Automated Clearing House, a huge network of banks batching transfers in the U.S. It has been managed by the National Automated Clearing House Association batches (NACHA) since 1974. Also known as direct deposit, ACH transfers are typically processed in groups.

This payment system allows users to transfer money either by ACH debit or ACH credit transactions. ACH debit transactions involve taking money from a bank account to pay, for example, a recurring bill payment. On the other hand, ACH credit transactions bring money to accounts from various banks. The account can be your own, your family members’ or your friends’.

What is a Wire Transfer?
Wire transfers are fund transfers that go through intermediary banks before finally being sent to the recipient’s bank. They generally require only an account number and a routing number. For international wire transfers, more details are required, such as IBAN and SWIFT/BIC.

Wiring money doesn’t have cross-border limitations unlike sending payments via ACH.

Exploring the Pros and Cons of ACH Payments Vs. Wire Transfers
The differences between ACH payments and wire transfers that happen behind the scenes rarely matter for end-users. What really matters are the differences between these two payment methods when it comes to cost, convenience, and security — factors that can significantly affect your business. Let’s take a look.

1. Cost
If a financial institution declares a transfer free of charge, it’s likely they’re providing ACH payments.

In general, you need to pay a fee when wiring money. Domestic wire transfers can cost from $10 to $30 on average, while international wire transfers cost from $15 to $50. Exchange rates and intermediary fees are also factors that add up to the expense. Sometimes, recipients are also charged.

On the other hand, ACH payments are mostly free for general users. For businesses, however, ACH transactions can cost around $1 or less per transaction.

Tip: Bank wire transfers cost more than ACH payments, but the higher the amount you’re sending, the more negligible the fees are. If you’re paying small amounts, it’s better to use ACH. However, if you’re regularly making high-ticket transactions, wire transfers are the way to go.

2. Ease of Setup
Setting up ACH and wire transfers are almost similar. Before proceeding with the transaction, the bank will ask you to provide certain details, particularly:

ACH Payments
The names of the sender and receiver
Account numbers
The name of the bank where the funds will be received
Bank account type (savings or checking)
Routing number
Transfer amount

Wire Transfers
Name and full address of the recipient
Name and full address of the receiving bank
Recipient’s account number and type (savings or checking)
Routing numbers, SWIFT/BIC code, and/or IBAN (whenever applicable)
Transfer amount
Reason for transfer

As you can see, both transactions require almost the same details. However, this setup process must be repeated every time you send or receive money via wire transfer. By contrast, you only need to provide the necessary information for an ACH transfer once, and upon approval, you can easily continue sending or receiving money regularly.

Tip: ACH transfers are designed with ongoing payments in mind. In fact, ACH payments are commonly used for smaller, recurring payments, such as direct deposits for payroll, subscription-based services, consumer bills, tax refunds, and tax payments. Thus, for recurring billing, use ACH. For one-time, high-value transactions, a bank wire transfer is a better option.

3. Security
Both ACH and wire transfers are lauded for their outstanding security, especially with their long-established connections with partner banks.

However, wire transfers are generally irreversible. Once a transaction has gone through, you may not be able to reverse the transaction should the need ever arise.

On the other hand, ACH payments can be reversed. To do so, you need to submit compelling evidence of transaction error or fraud for the bank to authorize a reversal.

Tip: As a business owner, wire transfers offer prevention if you’re a frequent victim of chargeback fraud. As a consumer, you may need to opt for ACH payments if the ability to file a chargeback means peace of mind.

4. Speed
Settlements via traditional ACH payment can take 2-3 business days to go through. There are some banks that offer next day ACH payment processing, although it’s not that common.

It’s worth noting that ACH transfers also have cut-off times, which means that after a certain time of the day, a transfer won’t be processed until the next business day. For example, if you send money through ACH on a Friday after the bank’s cut-off time, the payment will be processed on Monday next week.

As for wire transfers, their main selling point is fast processing time. Domestic transfers can be as fast as one business day, while international transactions take 2-3 business days.

Tip: Wire transfers are great for quick domestic transactions that aren’t only important, but urgent. If it’s something that can wait for 2-3 days, use ACH.

5. Flexibility
Both ACH and wire transfers have certain limitations when it comes to the transfer amount. ACH payments, in particular, have a daily and monthly cap. Meanwhile, wiring money over $10,000 in the U.S. requires further documentation. Additionally, saving accounts are limited to certain withdrawals to six per month as mandated by U.S. law. All in all, they’re evenly matched in that regard.

Transfer amounts aside, perhaps the only real disadvantage of ACH payments when it comes to flexibility is that they’re usually limited to domestic transfers within the U.S. It’s possible to make an international ACH transfer, but it’s extremely rare.

Tip: When sending funds overseas, go with wire transfers. For domestic transactions within the U.S., you can rely on ACH payments.

Which is Better for Your Business: Wire Transfers or ACH?
In the U.S., ACH transfers make the most sense for domestic, recurring payments. Although they take a bit longer than wire transfers, they are easier to use and cost way less when making ongoing payments to the same recipients.

Elsewhere, wire transfers are best as a rule of thumb when your top priorities are speed, security, and certainty. With wire transfers, transactions are:
Faster, taking only 1 day for domestic and 2-3 days for international transfers
Irreversible, helping your business avoid chargebacks
Less expensive when sending or receiving one-off, high-ticket payments
Domestic or global, depending on your current need

At EU Paymentz, we’d be happy to walk you through secure, reliable, and convenient global wire transfer solutions for your business needs. We also offer merchant account services for high-risk merchants, and payment processing for online gambling, Forex, and cryptocurrency. Talk to us to learn more about how we can make payment processing seamless for your business.

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