wire transfer vs ach transfer payment what is difference

Wire Transfer vs ACH Transfer

Digital payments saw a major increase during the COVID-19 pandemic as businesses were forced to go remote and paper payments became untenable. Both ACH and wire transfers move funds from one bank account to another, but there are key differences. Let's start with defining each and then we will compare Wire Transfer vs ACH.

An Automated Clearing House (or ACH) transfer moves funds from one account to another by using a clearing house as an intermediary. The automated clearing house is a computer-based network that verifies the funds before transferring it to the recipient account. The ACH network then approves the transaction and sends the funds on to the receiving account. A wire transfer on the other hand can be made directly from one account to the other and there are often fees associated as banks process the transactions directly.

Wire Transfer vs ACH Transfer - Quick Answer

Wire transfers are immediate and can be used for overseas payments. ACH is more secure and more cost-effective, but does not work for international payments. Wire transfers are best used for one-off large payments. ACH is best used for ongoing, recurring payments like payroll and B2B vendor payments.

Related: Are ACH Payments Safe?

Wire Transfer vs ACH Transfer - Long Answer

The 3 keys to comparing ACH Transfers vs Wire Transfers are: 

  1. Speed
  2. Security
  3. Cost

Which is Faster, ACH or Wire?

Traditionally, ACH transfers have taken days, while wire transfers are immediate. However, ACH has been sped up substantially with recent tech innovations and same day ACH limits are increasing. There is one key factor to consider when we are talking about the speed of ACH; businesses that use payments automation software that includes ACH transmission are transferring funds to the software services provider who then transfers to the ACH, before it goes to the recipient. Direct ACH Transmission offered by some accounts payable automation solutions, on the other hand, is just what it sounds like… direct. Learn more about direct ACH transmission here.

Which is More Secure, ACH or Wire?

ACH is more secure for payroll and accounts payable departments. Since wire transfers make funds immediately available to the recipient, they can't be reversed in the case of fraud or error. ACH on the other hand is often reversable and can be used to help prevent fraud and costly errors.

Which is More Cost Effective, ACH or Wire?

ACH transfers are cheap or even free while wire transfers can come with fees ranging from a few bucks up to more than $50 for overseas transactions. What's more, ACH's ability to prevent fraud and costly errors often translate into major cost savings.

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In Conclusion, Which is Better:  Wire Transfer vs ACH Transfer? 

  • ACH is the best option for regular frequent use scenarios like accounts payables processing because it is cost effective, reliable and secure.
  • Wire transfers are used when the transaction needs to be immediate and ongoing payments are not a concern.

For these reasons ACH has become the preferred method of payments for payroll and accounts payable professionals. Since the pandemic, ACH has become increasingly popular. In the first quarter of this year alone, ACH network processed 7.3 billion payments, a 35% increase over Q1 of 2020, according to a report from NACHA which oversees the network.

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