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ACH vs Wire Transfer – What’s the Difference?

A common topic we receive a lot of questions about is related to ACH transfers vs wire transfers.

Today both consumers & businesses have a wide array of options for paying their bills with accounts payable software. Lost in the seemingly endless options are the details of how those payments are actually executed, and what are the benefits & risks associated with making payments with each of these options.

Lets dive a bit deeper.

Table of Contents

What is an ACH Payment?

An ACH payment is an electronic funds transfer (ETF) processed through an automated clearinghouse network. It is a way to move money from one bank account to another without using paper checks, wire transfers, credit cards, or cash. ACH payments are often used for automatic bill payments such as utility payments.

What are the differences between the ACH transfer and wire transfer process?

There are several key differences between ACH and wire transfers.

For example, an ACH transfer is completed through a clearinghouse and is often used to process direct payments or deposits. Meanwhile, wire transfers allow money to move from one bank account to another (typically with a fee ranging from $10-$30).

This graphic below further explains some difference between ACH and wire transfers.


How is a wire transfer different than an ACH transfer?

ACH transfers and wire transfers are methods of moving funds from one bank account to another. They may seem similar, almost identical. 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 onto the bank. In this sense, the clearinghouse is essentially the middleman in this process.

Wire transfers also transfer funds from one account to a another, but instead of the ACH, banks are acting as middlemen.

Wire & ACH Transfer Speed

An ACH transfer can often take two to three business days to complete. They take a longer time to clear because many are processed by banks together at once.

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.

Cost of Transfers for ACH & Wire

Some ACH payment providers charge a flat fee ranging from $0.20 to $1.50 per transaction, according to Merchant Maverick, a comparison website that reviews small business software and services.  

Businesses may also have to pay a separate fee in the range of $5-to-$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. 

The good news is ACH costs are generally lower than other popular payment methods. Vericheck lays out the comparisons. Typically, ACH transactions cost a business under one dollar per transaction depending on the transaction volume and perceived risks.  

That’s much less than the typical $3-to-$5 cost per check transactions, which factor in printing, postage and personnel expenses. Costs to process a credit card payment can go much higher than ACH costs.  

So, ACH payments are attractive from the standpoint of convenience and cost. Just know they’re not completely devoid of costs. And the more ACH transactions you do, the less you typically pay per transaction. 

Wire transfers can cost both for the individual who sent it and the recipient. Many financial institutions charge $10 to $35 dollars to send, and smaller institutions may charge a fee to receive a wire transfer. On the high end, those costs can add up to about $55 when combining all fees, and international transfers can cost even more.

Payment Security in ACH & Wire

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. They’re a full step above cashier’s checks, which have become easy to fake. 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 to, because the money can be withdrawn right away and often the transaction can not be reversed once it is sent. Generally, they are secure.

How are ACH transfers most commonly used?

An ACH transfer is typically best for frequent or recurring transfers. These types of payments are typically used by businesses for direct deposit of employee pay. They’re also used for automated monthly invoices, like a scheduled payment for car insurance or student loans. Some mobile applications, like Venmo, use ACH to transfer funds between users securely.

Wire transfers are typically used much differently, when transfers need to be immediate. These types of transfers are used only when sending the funds quickly is critical. Otherwise, it makes sense to wait the extra time for the ACH transfer.

Is an ACH transfer a better option than a wire transfer?

When comparing the two, the only real advantage of a bank transfer vs. wire transfer is the speed of the transaction. ACH transfers are quicker, more convenient, cheaper, and more secure. If the funds need to be sent immediately, go with the wire transfer. If it’s something that can potentially wait three days, use the ACH transfer.

What does ACH stand for? How does it work?

The Automated Clearinghouse, or ACH, is a system created by the Federal Reserve Bank to transfer funds between accounts. ACH can be used for transferring funds between your own accounts, sending or receiving e-payments with vendors and clients, or even bulk sending or receiving a large number of payments with customers.

How can my business take advantage of these payment options?

Getting started with ACH processing requires an ACH merchant account, similar to the merchant account used for credit and debit card processing. Signing up for a merchant account typically requires general business information and a business credit check, and a checking account to link, but each bank and ACH service provider is a little different.


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