Wire vs. ACH transfers: What’s the difference?

Last updated on March 7th, 2024 at 11:13 am

Wire vs ACH: woman using a laptop and holding a credit card

With the rise of mobile technology and internet access, electronic banking has become more popular. When sending money to another state or overseas, electronic bank transfers can be fast and convenient.

Two common methods for completing such electronic transfers in the U.S. are ACH (automatic clearing house) transfers and wire transfers. While both types of transfers help move money between bank accounts, they work differently.

ACH transfers are slower, low-cost domestic transactions processed in batches, whereas wire transfers are faster, more expensive, and can be international.

This guide created by our team here at Remitly compares ACH vs wire transfer transactions and explains how each works.

What are ACH transfers?

ACH is governed by the National Automated Clearing House Association or NACHA.

An automated clearing house (ACH) transfer is an electronic transfer of funds from one account to another that occurs in batches.

Let’s break down how it works. When a financial institution starts a transfer, that transfer gets put into a batch in the ACH network with other ACH transfers. The automated clearing house network processes these together at a certain point in the business day.

After that, the receiving bank is able to process the transfer, and the money goes into the designated account.

ACH transfers can be used to make domestic transactions as well as international transfers to recipients located outside of the U.S.

How is ACH used?

ACH transactions can be used to both send money and receive money.

When money leaves an account, it is called an ACH debit. A deposit into an account is referred to as an ACH credit. All ACH payments include both a debit from the sender’s account and a credit to the recipient’s account.

Bill pay is one way ACH is commonly used. For example, your bank may offer a service that sends bill payments on your behalf from your account. You may even be able to set up automatically recurring payments. These ACH transfers can often be initiated through your online banking portal.

Similarly, if you’ve ever made a payment online using an e-check, you were using an ACH transfer. The money gets debited from your bank account and sent to the recipient’s bank, where it gets credited into their account.

ACH transfers are also used by companies or small business owners that offer direct payment options. When you receive your paycheck via direct deposit instead of via a paper check, your employer is likely using an ACH transfer.

Government benefits like Social Security are also typically sent as an ACH direct deposit.

Finally, some digital wallet apps that offer money transfer services like PayPal and Venmo will offer an ACH payment method.

What are wire transfers?

A wire transfer is an electronic transfer from one bank account to another. When remittance transfers involve accounts located in the same country, each transaction is called a domestic wire transfer. International wire transfers happen when the sending bank and the receiving depository financial institution are located in different countries.

ACH payments are more likely to be used for bill payments and ordinary deposits, whereas wire transfers are more common for sending large amounts.

A wire transfer will require information like a recipient’s account number, their contact information, and usually a routing number or SWIFT code.

How are wire transfers used?

Wire transfers can be used in the same ways ACH transfers can be used: to send money to friends and family, to receive payment for work, or to pay bills.

They can also be used when you need to transfer large amounts of money, such as for real estate transactions like making a down payment on a home.

Wire vs. ACH transfers: The key differences

Both wire and ACH transfers are types of electronic payments. They eliminate the need to send cash or use physical checks.

They have some basic things in common. For example, you’ll need to supply account numbers to initiate them. Both ACH transfers and wire transfers can also be set up to make recurring transactions automatically.

If you’re curious about the difference between wire vs ACH transfers, they mostly differ in terms of cost and speed. Let’s take a look at these differences.

Man writing on a notebook

What’s the transfer speed of wire vs. ACH?

Recently, NACHA has increased the same-day ACH limit as this method has grown in popularity. However, not all ACH transfers will be same-day. This is because the Automated Clearing House must clear the payment first before sending it to the recipient.

Once the funds have been released and the ACH has them, the transaction can be verified as having sufficient funds and sent over to the recipient’s account. This process can take at least a few business days.

A wire transfer may be completed as fast as within a single business day, depending on the location of the recipient’s banking account. However, it’s best to check with the financial institution to find out their delivery estimates. Keep in mind that an international wire transfer may take longer to process.

What are the costs of ACH vs wire transfers?

At the time of writing, the Association for Financial Professionals says it costs around $3 to send an ACH transfer. For the recipient, an ACH is typically free.

It’s important to note that you may not always pay to initiate an ACH transaction. With online bill pay services and payment apps, you typically aren’t assessed any fees. At some banks and credit unions, online bill payments may be free until you make so many bill payments that you exceed a set number of transactions or a total dollar amount per day, week, month, or year.

Mostly, fees are assessed for making a large number of direct payments via the ACH network, such as when processing direct deposits for an entire company.

Wire transfers typically cost a bit more. At the time of writing, costs may range from $15 to $50, depending on the recipient’s location and the amount of the transfer.

For the recipient, many financial institutions charge a fee for processing and accepting the transfer, too. Banks and credit unions are free to establish their own wire transfer fees, and they often charge more for international wires. As a result, it’s a good idea to consult your financial institution to find out how much you can expect to pay as the recipient or sender of a wire transfer.

How secure are these transfer methods?

Both ACH and wire transfers are regulated to prevent abuse and fraud. In general, money transfer companies and banks are heavily regulated.

To be safe, be sure to follow best practices for online banking and payments. Only send money to recipients you trust. Keep your personal information secure and don’t share passwords.

What are other differences between ACH and wire transfers?

There are a few other major differences to be aware of when comparing ACH vs wire transfers, including:

Limitations

Banks and credit unions may limit how much money you can send with both wire transfers and ACH transactions. These limits tend to be higher for wire payments.

Reversibility

ACH transfers can be reversed if errors occur or a person disputes a transaction. This is a major difference between ACH and wire transfers, which are difficult or sometimes impossible.

Fraud risks

Because ACH transfers can be reversed, they’re not as attractive to scammers. On the other hand, wire transfer payments can be useful to people running scams because they make it difficult or impossible to recover funds.

Person holding a phone

Should you choose an ACH or wire transfer?

Now that you know how ACH payments and wire transfers work and the differences between these electronic fund transfers, you’re ready to choose which is right for you.

The best approach is to consider each payment that you need to make on a case-by-case basis, as you’re typically free to use both options if you have an account with a bank or credit union.

To decide between ACH vs wire transfer methods, consider the following.

Why are you transferring money?

The first thing to think about is why you need to transfer money. Some reasons may lend themselves to one type of payment over another.

For example, if you’re making a payroll direct deposit, you would usually choose an ACH transfer because you’ll pay lower processing fees and your employee typically won’t be subject to any fees for having money deposited into their bank account. Or, if you’re making personal payments, initiating an ACH transaction through a company’s website may be easier.

How quickly do you need to transfer money?

As previously mentioned, wire transfers may arrive as soon as one business day. In some cases, ACH payments may also be available quickly, but there is a chance that it could take significantly longer. Consequently, a wire transfer may be the better option when your payment needs to go through quickly.

How much do you need to transfer?

Limits for wire transfers tend to be higher than they are for ACH transfers. If you’re sending a large amount of money like for a down payment, you may need to opt for a wire transfer.

What are the payment terms?

In some cases, a payment request may specify how you need to pay. Some companies may only accept ACH payments or wire transfers.

Is the recipient trustworthy?

Anytime that you have reason to doubt the intentions of the recipient or you don’t know the recipient personally, ACH transfers are usually the better choice. Because the ACH network can reverse a transaction, you can typically get the funds from an ACH payment back, but with a wire transfer, you’re likely to be out the money once the transaction is complete.

Some times when you may want to choose ACH payments over wire transfers due to security include:

  • When purchasing something person-to-person from a classified ad
  • When responding to a request for payment from a party you’re not familiar with
  • When making donations to crowdfunding or charity drives for individuals or organizations that you’re not familiar with

Remember that doing careful research is important for protecting yourself whenever you’re paying someone. Become familiar with common online scams, so you can spot suspicious people.

Simplify how you send money

If you need to send money to your friends and family in your home country, Remitly makes international money transfers easier, more transparent, and more affordable.