In this article, we’re going to be covering the difference between ACH vs a wire transfer.
This article is part of our free series on sending money, including the ultimate guide to bank checks, which you can access here.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- ACH vs Wire Transfer
- Automated Clearing House (ACH)
- Wire Transfer
- How to Choose the Right Transfer Method for Sending Payments
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
ACH vs Wire Transfer
The main difference between an ACH transfer and a wire transfer is that an ACH transfer is used for domestic transfers and lower-value transfers while a wire transfer is used for international transfers and higher-value transfers.
Additionally, ACH transfers typically take one to three business days to arrive at the intended recipient’s account. Comparatively, wire transfers can be sent within the same business day, depending on where the funds are being sent.
In terms of the actual sending of funds, ACH transfers and wire transfers also use different systems. ACH transfers clear through the automated clearing house (ACH) while wire transfers clear through the Society for Worldwide Interbank Financial Telecommunication, more commonly known as the SWIFT network.
In the following sections of the article, we will explore both ACH transfers and wire transfers in greater detail.
Automated Clearing House (ACH)
Automated clearing house (ACH) refers to the system used to send and receive electronic funds transfers in the United States. Other countries, like the United Kingdom, also have their own automated clearing house as well.
What Is an ACH Payment in the United States?
In the United States, ACH transfers are more cost-effective than traditional wire transfers because of the efficiency gains offered by the clearing process. In short, the ACH clearing process involves batched transfers that clear at set times during the day.
However, because they are sent and received at set times during the day, it is possible that ACH transfers will take longer than traditional wire transfers. Additionally, ACH transfers are typically limited. In most cases, banks will impose a “daily total transfer limit”, a “per transaction limit”, and a “monthly limit” in relation to how much each customer can send through ACH.
What Are the Benefits of ACH Transfers?
The main benefit of sending an ACH transfer over a wire transfer is that they are more cost-effective, easy to navigate, convenient to send through online banking, and less prone to human error due to the limited information required.
Wire Transfer
Wire transfers can involve both domestic and international transfers, sending money from an account holder at one bank to an account holder at another bank. In most cases, wire transfers are fast, secure, and have few restrictions on the amount of money that can be sent. However, wire transfers are often an expensive way to send transfers. For this reason, most domestic transfers are sent through ACH transfers instead.
How Do Wire Transfers Work?
Wire transfers work by connecting the sending bank and the receiving bank through the Society for Worldwide Interbank Financial Telecommunication (SWIFT). The information provided by the sending party about the receiving party, the receiving bank, and any related correspondent banks, is then used to connect the two banks and complete the transfer.
What Are the Benefits of Wire Transfers?
Wire transfers are fast, and secure, and do not have limits on the amount of money that can be sent. With this in mind, they are a suitable option for anyone looking to send large transfers, especially those with a deadline. Additionally, wire transfers are one of the most secure methods for sending money internationally.
How to Choose the Right Transfer Method for Sending Payments?
To choose the right transfer method for sending payments, you should determine (1) Where are you sending the transfer? (2) How much are you sending via the transfer, and (3) How soon does it need to arrive?
If you are sending the transfer outside of the country where your bank is located, then you will automatically need to use a wire transfer. On the other hand, if you are sending smaller transfers, you can choose to use ACH while larger transfers will require a wire transfer. Lastly, wire transfers are usually cleared faster than ACH transfers. So, depending on when you need the transfer to arrive at the recipient, you would choose the option that is best suited to your needs.
Who Can Use an ACH Transfer?
Any account holder can use an ACH transfer if their bank is part of the Automated Clearing House (ACH) network. That said, for this to be an option, they need to be sending funds domestically to another bank also connected to the network.
Who Can Use Wire Transfers?
Any account holder can use wire transfers if their bank is part of the Society for Worldwide Interbank Financial Telecommunication (SWIFT). That said, they need to be sending funds to another bank that is also part of the SWIFT network and has a SWIFT code that can be used when completing the transfer.
Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into the difference between ACH vs wire transfer. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
Which Is Better ACH Transfer or Wire Transfer?
Whether ACH transfer or wire transfer is better for you will depend on where you are sending money to, how much money you are sending, and how soon you need it to arrive. If you are sending less than a few thousand dollars to another bank in the same country and it can take several days to arrive, then ACH will likely be the best choice. However, if you are sending a high value transfer and you need it to arrive immediately, you will want to look at sending a wire transfer.
Is ACH Transfer or Wire Transfer Cheaper?
Sending an ACH transfer is cheaper than sending a wire transfer. This is because ACH transfers send bulk payments, which reduces the operational burden on the bank, allowing them to pass on savings to customers.
Can ACH and Wire Routing Number Be the Same?
Yes, the ABA routing number used for sending an ACH transfer and a domestic wire transfer are the same. You will also need to provide the bank account number and the name of the bank. That said, wire transfers will require additional information about the recipient as well as information about any correspondent banks involved in the transfer.
What Is an ACH Bank Transfer?
An ACH bank transfer is another name for an ACH transfer. In other words, it just refers to the same ACH transfers that we have been discussing in this article.
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