Wire transfers and transfers via the Automated Clearing House (ACH) are both ways to move money from one place to another. However, there are some key differences between them that make one a better choice than the other, depending on how quickly you need the money to get there and if you mind paying a fee.
With an ACH transfer, money is sent from one bank to another by way of an intermediary (the Automated Clearing House). With a wire transfer, money is sent directly between two different banks. Wire transfers are generally faster than ACH transfers but come with a higher cost.
Here’s a closer look at ACH vs. wire transfers and why you might use one or the other to send money to an individual or business.
What Is a Wire Transfer?
A wire transfer is a type of electronic funds transfer (EFT) that goes directly between two financial institutions. Since there is no middleman, wire transfers are fast — the money typically arrives the same day, and sometimes instantaneously.
It’s common to use a wire transfer when money needs to be sent quickly, or when money needs to be sent internationally, since a wire transfer allows currency exchange if necessary.
But this expedited service comes at a cost. Wire transfer fees can run around $30 for domestic wires and $50 for international wires. Some banks may even charge you a fee to receive a wire from someone, which can run anywhere from $5 to $15.
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How Does a Wire Transfer Work?
You can send a wire transfer from your bank or a nonbank transfer service like Western Union. To wire money, you need to fill out a form and include the name of the recipient’s bank, that bank’s routing number, and the recipient’s bank account number (if you want to receive a wire transfer, you’ll need to provide these details).
Once you submit the wire transfer form, the bank processes your instructions and sends them to the recipient via a messaging system (such as Fedwire for domestic transfers and SWIFT for international transfers). The receiving institution reviews the instructions and credits the recipients with the designated amount.
What Is ACH?
An ACH transfer is a type of electronic payment between bank accounts using the Automated Clearing House (ACH) network. The ACH is a centralized system for moving money between financial institutions in the U.S. Businesses are charged a nominal fee to send or receive ACH payments, but this fee usually isn’t passed on to consumers.
You can make an ACH transfer to any person or entity that has a bank account. But unlike wire transfers, ACH payments don’t happen immediately — they are generally processed in batches several times per day.
The ACH network is commonly used to process transactions such as direct deposits, direct payments, recurring payments (like autopay), e-checks, and electronic funds transfers (such as transferring funds between accounts you have at different banks).
How Does ACH Work?
There are two main types of ACH transfers: ACH credit transfers and ACH debit transfers.
ACH credit transfers are when you “push” money online to an account at a different bank, either an account you own or someone else’s account. When you sign up for direct deposit, your employer pays you using an ACH credit transfer.
ACH debit transfers involve money getting “pulled” from an account. When you set up a recurring bill payment, for example, the company you’re paying can pull what it’s owed from your account each month.
The Key Differences Between Wire and ACH Transfer Payments
To decide which option for transferring money is best for your needs, you’ll want to consider the following differences between wire transfers and ACH payments.
| ACH | Wire Transfer | |
|---|---|---|
| Availability | Domestic and international | Domestic and international |
| Security | Built-in protections against fraud | Fewer transaction safeguards due to speed |
| Transfer limits | Generally high but varies by bank | Up to $1 million per day |
| Processing times | 1-3 days | Typically, same day (sometimes instantaneous) |
| Reversals | Possible within the same day | Typically not possible |
| Fees | None for consumers | $30 to $50 (or more) |
Availability
Both ACH and wire transfers can be used to transfer funds to individuals or businesses in the U.S. or abroad.
Security
Both wire transfers and ACH payments are considered secure. However, the slower ACH process gives people more time to request a cancellation if there’s a problem with the transaction.
Wire transfers happen more quickly, so there’s less time to reverse a mistake or fraudulent transaction. Generally, wire transfers are final once they’ve been sent.
Transfer Limits
Wire transfers are regulated under the Electronic Fund Transfer Act (EFTA), which does not put a limit on the amount of money a person can transfer. However, financial institutions often impose daily transaction limits on deposits and withdrawals from accounts.
Consumers and businesses are generally limited to $1 million per day on ACH transfers.
Processing Times
While same-day ACH transfers do happen, it’s more common for an ACH transfer to take a few days to process. On the other hand, a wire transfer is generally processed the same day that it is sent, and it’s not uncommon for wire transfers to be sent instantly. An international wire transfer may take a few days.
Reversals
Because ACH transfers don’t happen right away, it’s often possible to reverse an ACH transfer if you discover an error within the same day you sent it. Because wire transfers happen much faster (often instantaneously), it’s not always possible to reverse them. For this reason, it’s important to only wire money if you are certain the recipient is trustworthy.
Fees
Businesses may need to pay a small processing fee for an ACH transfer, but generally consumers don’t incur any charges for ACH. Wire transfers, on the other hand, usually aren’t free — fees can range from $30 to $50 or more, depending on the financial institution and whether you’re wiring money domestically or overseas.
The Future of ACH and Wire Transfer Payments
Both ACH and wire transfers have been around for decades, and aren’t going anywhere. ACH payments are poised to undergo a substantial shift in the next few years as demand grows for faster digital payments. Wire transfers are expected to become safer as institutions develop better fraud protection systems. Fees for wire transfers may also come down.
Wire Transfer vs. ACH: Which Should You Use?
If you need to send money to a person or business, the best method will depend on how quickly you need it to get there and whether you mind paying a fee.
A wire transfer will typically get money into the recipient’s bank account significantly faster than an ACH transfer. However, these transfers usually come with a cost. If the need isn’t urgent, you’re generally better off with ACH. These transfers are free and can be used to set up recurring payments. They also have built-in fraud protection since the transfer doesn’t happen instantaneously.
The Takeaway
Wire transfers and ACH transfers are two different ways to send money electronically. When considering the differences of ACH vs. wire transfers, keep in mind that ACH transfers take a bit longer to process, but they are usually free. They’re also ideal if you’re looking for a convenient way to pay bills from your bank electronically. If you need to send funds to someone right away or transfer money to someone overseas, a wire transfer is likely the best option.
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FAQ
Why would you use a wire transfer?
You might use a wire transfer if you need to send money to someone overseas, since they are easy to exchange to a foreign currency. Another time when you might use a wire transfer is if you need to send money to someone quickly. Domestic wire transfers are typically processed the same day (and sometimes instantly), while international transfers are usually completed within a few days.
Is wire transfer safer than direct deposit?
Both wire transfers and direct deposits are considered safe and secure. However, since wire transfers generally happen on the same day (and sometimes instantly), it can be hard to reverse a wire transfer in the event of a mistake or fraud. Because of this, it’s important to make sure your wiring instructions are correct and you’re sending money to someone you trust.
How safe are ACH transfers?
ACH transfers are facilitated by the National Automated Clearing House Association (NACHA), and considered a secure way to send money. Also, because ACH transfers generally take a few days to process and post, it’s generally easier to reverse a mistaken or fraudulent ACH transfer compared to a wire transfer.
Can ACH be lost?
ACH payments generally don’t get lost. However, an ACH payment may not get to its intended recipient if the routing or account numbers are incorrect. If this happens, you may be able to reverse the ACH transfer if you flag the error soon after you send it.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
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