What’s the Difference Between ACH and Wire Transfers?
Posted June 10, 2024
In 2024, there’s no shortage of ways to electronically transfer funds between accounts. From platforms like Zelle and Venmo, to direct deposits, the options are almost endless.
Let’s take a look at two popular ways to transfer funds, automated clearing house (ACH) and wire transfers, and then explore their key differences.
What is ACH?
Automated Clearing House (ACH) transfers are used to transfer funds between bank accounts. Requests are processed through the Federal Reserve in batches and may take up to three business days to complete. This is a cost-effective and secure method for reoccurring and non-urgent transfers. For bill payment items, the ACH request is typically set up through the merchant.
ACH transfers include:
- Direct deposit for paychecks
- Direct deposit for government benefits
- Automated bill payments
- Person-to-Person (P2P) payments
- Business-to-Business (B2B) payments
What is a Wire Transfer?
Wire transfers are used to transfer funds from one financial institution to another both in the U.S. (domestic wires) and internationally. The transfer of funds is almost immediate, and the funds can be accessed quickly. Once a transfer has been accepted by the receiver, it cannot be reversed. This is an efficient method for a one-time urgent transfer, with processing fees for the sender and the receiver.
Wire transfers are commonly used for these transactions:
- Down payments
- Federal tax payments
- Car purchases
What’s the Difference Between ACH and Wire Transfers?
While ACH and wire transfers are means for sending funds from one account to another, there are several important distinctions between the two methods:
1. Speed and Timing
ACH transfers are usually received between one to three business days after the request is sent.
Wire transfers are typically processed the day they arrive, often in just a few hours. The transfer must be initiated before the institution’s established deadline (typically 3:00 PM) to benefit from same-day processing. International transfers will take longer to clear, up to 10 days.
2. Cost and Fees
ACH transfers usually come at no cost. However, sometimes a nominal fee will be charged.
Wire transfers, on the other hand, have high fees attached. Domestic wire transfers typically cost between $25-$30, and international wire transfers can cost up to $50. The receiver may also be charged up to $25.
3. Security
ACH transfers are generally low-risk. Your money goes through a regulated clearing house, and if the ACH is initialized by another institution to pull money from your account, the risk rests with them. ACH fraud is possible, but it is less common than with wire transfers. Be sure to track any ACH transfers you make and request a reversal of funds if you notice any suspicious activity.
Wire transfers are notoriously favored by scammers for their irreversibility and lack of traceable evidence. Once a wire transfer has been accepted, there’s usually no way to reclaim the lost funds. It’s also difficult to identify the recipient of the transfer once it has been made. It’s crucial to verify the identity and account information of a recipient before agreeing to send funds. Never send money to an unverified contact or new retailer.
ACH and wire transfers are two means of moving money from Point A to Point B, but there are distinct differences between the two methods. Wire transfers are faster but more expensive with risk, while ACH transfers are slower but cheaper and more secure.
Always be careful when sending money, and let us know if we can help! Visit us in-branch, or call our Member Service Center at 831.479.6000 or toll-free at 888.4BAYFED.
Categories: FinancialAdvice Security
