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Automated Clearing House (ACH) and wire transfers are used to move money between banks. Wire transfers are usually processed the same day and are a bit more costly, whereas ACH transfers can take longer.
Read on to learn more about ACH and wire transfers and how they differ.
What Is an ACH Transfer?
ACH transfers get their name from the Automated Clearing House network, which includes about 10,000 financial institutions. The ACH network can be used to process transactions such as direct debits, direct deposits, direct payments, electronic checks (eChecks) and electronic funds transfers (EFTs).
Both consumers and businesses use ACH transfers for transactions that fall into two categories: direct payments (ACH debit transactions) or direct deposits (ACH credit transactions). Some financial institutions also offer bill payment, which allows you to schedule and pay all your bills electronically using ACH transfers. Or you can use the ACH network to initiate transfers to individuals or merchants abroad. If you're a business owner, you can also use ACH transfers to pay your vendors or employees.
Often, ACH transfers clear the bank in just a few business days if there are sufficient funds in the account. Transactions can take longer, though, under certain circumstances—such as if the system detects a potentially fraudulent transaction.
What Is a Wire Transfer?
A wire transfer is an electronic payment service used to move money between accounts. This method can be used to transfer money for a same-day arrival, but the expedited service comes at a premium.
There are two types of wire transfers: domestic and international. International transfers are also called remittance transfers, international wires or international money transfers, and must be for more than $15 when sent from the United States to another country.
It's not uncommon for consumers to use wire transfers to make hefty one-time payments that require same-day processing for transactions related to real estate. But be mindful that same-day limits on fund transfers may apply.
Key Differences Between ACH and Wire Transfers
Before you initiate an ACH or wire transfer, it's important to understand how they differ. Consider these factors when deciding which option is best:
- Availability: ACH transfers only work for domestic transactions. If you want to send funds abroad through the ACH network, you must do so using an international wire transfer.
- Security: Both types of transfers offer security measures you aren't afforded when you send a paper check. Financial institutions that handle wire and ACH transfers provide an added layer of protection because banking information is encrypted during the transfer. Both types of transfers require steps to be taken to verify identity or banking information before the transaction can be completed, but mistakes and fraud do happen. While ACH transfers can be stopped, wire transfers work much more quickly and are final once the funds are received—canceling a wire transfer is usually a race against time.
- Transfer limits: Daily transfer limits apply for ACH and wire transfers. Check with your bank or credit union to confirm.
- Processing times: ACH transfers can take one or more business days to process, but most wire transfers are processed the same business day.
- Posting times: Wire transfers allow recipients to access funds the moment they hit an account. ACH transfers are slightly different: The funds will appear in "pending" status and won't be released to you for use until they clear the ACH system. This could take up to three business days.
- Reversals: The good news is you may be able to request a transaction reversal for ACH transfers if there's an error. Wire transfers don't offer this luxury and are permanent once the transaction is initiated.
- Fees: Expect to pay a fee from $10 to $35 for each wire transfer you initiate. Recipients are sometimes subject to a nominal fee for incoming wire transfers. Most ACH transfers are free, but a fee may apply for expedited bill pay services or transfers to outside banks.
Which Option Is Best?
If you're torn between an ACH or wire transfer, consider the processing time and fees. ACH transfers take a bit longer to process, but are usually free. They're also ideal if you're looking for a convenient way to pay bills electronically. But if you need the funds to arrive the same day or make a cross-border payment, a wire transfer is the best option.