In today’s age of digitally powered commerce, many transactions are powered by the electronic transfer of funds. ACH payments and wire transfers are two common ways of exchanging money without cash or credit cards—just sending it from one bank to another. But while these two payment methods seem similar, there are several differences between ACH and wire transfers. Knowing those differences will help you know which method is best for your business’ types of transactions. As you’ll see, wire transfers are good for select types of transactions, but by and large, most businesses will want to use ACH payments.

ACH vs wire transfer | ACH credit flow example

What is a Wire Transfer?

A wire transfer involves two partnering banks working together to transfer funds, as one is sending, and one is receiving. The transaction itself is completed by bank tellers or third-party payment processors (TPPPs) who can verify the receipt of payment.

You can, however, send and receive money through wire transfers. In most cases, nearly instantly. If, however, you are sending or receiving a wire transfer overseas, it might take anywhere from 1-5 days for the payment to totally clear.

Wire transfers are completed by the sending and receiving banks, without any middleman such as a clearinghouse. The name of the recipient, their address, account number, and routing number are needed to initiate a wire transfer. This generally costs the sender between $10 to $30 for domestic wire transfers and $45 to $50 for international transfers.

You might think that apps like PayPal, Venmo, and Zelle are wire transfers since they send money instantly, but they are not. They actually use the ACH network!

What is an ACH Transfer?

ACH vs wire transfer | ACH payment

The Automated Clearing House (ACH) network also facilitates the electronic transfer of funds from one bank to another. However, in ACH payments the ACH network acts as a middleman, facilitating transfers in several batches throughout the day instead of one at a time. The ACH network can sometimes facilitate international transactions but is most commonly used for recurring domestic transactions like monthly bill payments and direct deposits as part of payroll.

As implied in the name, much of the ACH network is automated, which reduces the need for tellers on the sending and receiving end to verify and secure the transaction. At the same time, this actually means that the transfers are not instant, and may take anywhere from 1-2 business days. The automated nature of ACH payments makes them perfect for any kind of recurring transfer, whether that involves crediting an employee account with a paycheck or debiting a tenant account with the amount they owe for rent.

ACH payments are set up by having the customer, employee, or vendor fill out a form. These forms can be online, on paper, or verbally. Once this information is collected and approval is obtained, payments can be made on a recurring basis until they are canceled or the agreement expires.

What Are the Differences Between an ACH and a Wire Transfer?

So what are the key differences between ACH vs. wire transfer? The first noticeable difference is the cost to the person initiating the transaction. Wire transfers are often more expensive per transaction since they can cost anywhere from $10 to $50 per transfer. Additionally, sometimes a wire transfer can trigger a charge for the recipient at around $15. By contrast, the average median cost for the initiator of an ACH transfer is $0.29 cents. This makes ACH payments a clear winner in terms of cost. In some cases, such as with large amounts of money that must be moved now, the wire transfer fee may become too negligible to be worth noticing, especially if time is of the essence.

Security is another consideration when considering ACH vs wire. Generally speaking, both types of transactions are fairly secure, since the banks involved established verified connections. However, wire transfers do present a slight risk to the sender because transactions are nearly impossible to reverse. ACH payments have an extra layer of security because the clearinghouse stands as a middleman between the banks and can rectify issues like fraud. However, wire transfers can be useful to vendors for curtailing chargeback fraud and even genuine chargebacks, precisely because transactions are not easily reversible.

Convenience is another factor to assess when comparing ACH transfer vs wire. ACH is the clear winner as wire transfers are inconvenient. Each time you want to initiate a wire transfer, you will have to go in-person to or call your bank to provide the name, address, bank account number, and ABA number of the recipient. It doesn’t sound like a huge deal, but what if you have ten different vendors and suppliers to pay? Even if you’re only needing to make one wire transfer, remember that it’s a comparatively manual process. A call to your bank might turn into a 5 or 10-minute affair. By contrast, ACH payments are all about convenience. They are, by nature, intended to facilitate recurring payments, so you only need to collect the requisite information for the transfer one time — along with some key details that facilitate its repetition, such as payment dates. Also remember that the ACH network can be used to send and request funds, while wire transfers can only be used to send money.

What Is Best for You and Your Business?

You will want to use ACH payments for any kind of recurring transaction, both credits, and debits. That means direct deposit for employee paychecks and vendor payments. ACH certainly is useful for collecting recurring payments, because it collects them right from a customer’s bank account, making sure their payments are on time – whether they’re paying attention or not. You do not need to input the same information over and over again. Instead, you just sit back and collect.

There are times when you will need to make a wire transfer. ACH payments are not the best for emergencies, since they can take 1-2 business days (sometimes slightly longer) to process. Sometimes a recipient’s bank may be outside the ACH network, such as an international client. If you suspect that a client may attempt a chargeback or even chargeback fraud, requesting a wire transfer may mean that you can take your cash and run.

As you can see, generally speaking, ACH is the clear winner in terms of ACH vs wire transfer. ACH payments are automatic, which means you don’t need to worry about them. Their cost per transaction is very low – much lower than wire transfers or even credit cards. The truth is that most small businesses do not need funds sent with the speed of wire transfers, but they do need to collect their payments consistently. Take a look at Rotessa’s free online authorization form. We’re confident that you’ll want to learn more about how Rotessa’s ACH payment solutions can seamlessly interface with your business and its accounting software, saving you time, and of course, money.

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