ACH vs. Wire Transfer

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Consumers and companies have a vast choice of options to transfer money these days through traditional or more modern internet-based banking. Two of the more common methods are known as ACH or wire transfers. But what exactly is the difference, and how do they work?
This is actually a question we hear pretty much daily. It seems like many folks out there have absolutely no idea what the difference is between the two types of transfers, and with so much uncertainty, we figured it was time we addressed the question and gave more detailed answers on all things relating to ACH vs. wire transfer procedure, and general information.
What Is the Difference Between ACH Transfer and Wire Transfers?
Before the deep dive, and for those of you pressed for time or just looking for a quick answer, let’s start the article by giving a brief answer to the question before exploring it in more detail:
In layperson’s terms, ACH transfers and wire transfers are simply two ways of moving money between a third party.
An ACH payment is a digitally processed transfer between various banks, which at some stage will go through a dedicated center set up to process this specific type of payment. This is known as an Automated Clearing House Network.
On the other hand, in its most basic terms, wire transfers are simply peer-to-peer payment transfers from one bank or financial house to another. The sender bank creates and sends a message, including all payment details, to the receiver’s bank or financial institution via a very stable, secure transfer process similar to FEDWIRE.
ACH Transfer vs Wire Transfer – Deep-Dive
So, the basic answer to the question is really relatively straightforward. ACH is free, but it takes a couple of days. Wires are instant (or at least same day) but do come with a charge. However, there are some finer points to consider with the two transfers, so let’s look at their various mechanics and figure out the difference between wire and ACH payments – since we’ve already mentioned a few above, we will skip over them.
Payment Options & Security
Wire transfers are far more malleable, with the option to facilitate between debit cards, bank accounts, or third-party payment providers like Transferwise and PayPal. ACH, on the other hand, only transfers through bank accounts directly.
ACH transfers are generally viewed as the more secure option, employing more secure networks like NACHA. That is not to say that a wire transfer is particularly insecure: they are simply less secure than an ACH transfer. Also, wire transfers are extremely difficult to reverse.
Global Limitations
Again, an ACH payment is restricted to within the USA only. International transfers are possible, however, through specific banking networks inside the global ACH system. There is hope within the banking system that one day soon, ACH payments will be made readily available worldwide, and in our opinion, it’s a question of time before that happens.
Wire transfers do not have the global restrictions that ACH has. Wires are also established with a vast network of banks and clearing houses in countries covering the entire globe, and as a result, they always transfer with far greater ease. That does come at a charge, however, and at times quite a costly one, with the average international wire fee coming in, at the time of writing, around the $50 price point.
Speed
With ACH transfers, payments are always sent over on the same day – but the process involved can take a few days. The average, at the time of writing, is 3.4 days for an ACH payment to clear in the receiver’s bank.
Wires will always have a far greater advantage over ACH transfers owing to their same-day nature of them – or at the very worst, within 24 hours. If the daily cut-off point has been exceeded, wires are automatically processed the following banking morning and will almost certainly show on that same day.
Fees
ACH fees are quite low, especially in comparison with wire transfers. In most cases, the fee runs out to 1% of the total amount. However, that only applies up to the value of $/£10 (depending on which platform you use). For the vast majority of recipients, it is free to receive an ACH payment. However, some banks may incorporate a charge at their discretion.
In case of wire transfers, on the other hand, average fees for domestic transfers vary from $0-$50 to send and receive or provide an intermediary role in the process. The exception to this is, of course, international wires, which are more expensive, and can cost as much as $100.
Safety
ACH transfers are relatively safe, but occasional fraud cases are appearing more frequently than you might imagine. While that sounds rather dramatic and probably of a surprise to you, we must stress that even still, the chances of a security breach in some way are still quite slim.
For an ACH fraud, scammers must simply acquire an account and bank routing numbers. As you are likely aware, modern-day phishing techniques are the prime culprit in obtaining them, which happens daily.
However, even if an illegal, fraudulent funds transfer is processed from your account, you can avoid liability for the payment if you notify your bank or processing house within two months.
Wire transfers are highly secure, providing, of course, the fund transfer is not fraudulent. Wires are, however, often used in various types of scams from time to time. That said, banks and the CFPB provide some level of fraud cover if the consumer makes the bank aware in a reasonable time period.
Of the two, ACH transfers offer a greater level of security, the least risk of fraud, and the easiest process to deal with fraud in the event of it happening.
Cancellation
Once initiated, an ACH can not be terminated (apart from instances of fraud); however, they can be disputed, with no guarantee of a satisfactory outcome. Errors will be spotted by the system, and as a result, transactions will be rejected. If a transfer has been sent using incorrect details, the sender can request to terminate the transfer, but again, there is no guarantee. Debits will be sent back in the case of inadequate funds available or claimed as a non-auth for two months after the transaction date was started.
Owing to the speed involved with a wire transfer, the cancellation or dispute window is narrow. It is possible to cancel a transfer before it arrives in the recipient’s bank. Still, bear in mind, however, that transfers are liable to settle extremely quickly in some cases. If the bank is liable for the issue, a reversal is guaranteed by the bank.
In short, when it comes to wire transfer vs ACH and cancelation, ACH transfers provide greater flexibility with error resolution and disputes.
ACH Transfer vs Wire Transfer – Wrap Up
In summary, there are a few things to take away here – some quite obvious, others less so. ACH transfers are probably the best option for businesses or anything of an official nature – while wire transfers are probably better suited for personal payments and one-off payments.
There are risks involved with both, although the chances of anything fraudulent transpiring are slim in both cases. The greatest risk lies with human error, wherein an ACH payment is the best option for potential disputes.
The most significant difference in ACH vs wire transfer lies in speed and cost. The balance isn’t perfect, and you must choose between speed and sometimes costly wire transfer fees or the low ACH costs while compromising on speed.
Discuss your ACH options with Payment Savvy today!