ACH vs Wire Transfer: What's the Difference?

ACH Processing

ACH transfers and wire transfers are two methods used for moving funds from one bank account to another. But what’s the difference between an ACH vs wire transfer? As NACHA recently announced Same Day ACH last year and is expanding its capabilities this year, both approaches seem more alike now than ever. To that end, this post will explore some of the critical differences between ACH vs wire transfer, in the context of a few categories.

ACH vs Wire Transfer Speed

Standard ACH transfers can take a few days (most commonly 2-3 business days) to complete as a result of settlement periods enforced by NACHA. However, with the recent introduction of Same Day ACH, ACH credits can be accessed by the receiver as early as the same day.

The main advantage of wire transfers is that you can send funds almost immediately. Typically, there’s no hold on funds sent by wire transfers, meaning that the receiver can access them right away.

Sending / Requesting of Payments with ACH / Wire Transfers

With ACH transfers, you can both send and request payments. With a few exceptions, ACH transfers are both sent and received inside of the United States.

With wire transfers, you can only send payments (there is no ability to initiate a request, unless a reverse wire is set up, which essentially authorizes the recipient to initiate the wire on behalf of the sender). Wire transfers can be sent and/or received internationally.

ACH and Wire Transfer Costs

In some instances, such as with P2P payments, ACH transfers are free. For businesses, ACH transfers cost between $0.10 and $2.50 per transaction, depending on processing volume and assessed risk.

Wire transfers, on the other hand, can cost between $10 to $35 to send each transfer, and smaller institutions may also charge a fee to receive a wire transfer. International transfers can also cost more.

ACH vs Wire Transfer: Security

Generally speaking, both transfer methods are secure. The security risk for each depends on whether you’re sending or receiving funds.

With ACH, NACHA guidelines allow receivers to dispute funds in the event of a fraud or payment error. NACHA also ensures that banks and third-party payment processors adhere to commercially reasonable fraud prevention, identity verification, and network security measures to combat security risks. A few ACH payment processing providers are even providing instant identity and bank account verification.

Wire transfer funds are available for withdrawal immediately once received by the receiving, and often transactions can’t be disputed and recovered after they’re sent. It’s therefore essential to know and confirm the identity and account that you send funds to via a wire transfer.

ACH vs Wire Transfer: Use Case

ACH and wire transfers are rarely used for the same purpose. It can be helpful to understand which option to choose if you’re assessing which transfer method is best suited for your needs.

Standard ACH transfers are often used for recurring transfers, such as direct deposits or bill payments set on autopay. Same Day ACH can be used for emergency payrolls, last-minute bill payments, insurance claims, disaster avoidance payments, issuing refunds, and more.

Wire transfers are often used in cases where bank transfers need to be immediate and are not as easily reversible. Examples of wire transfers include large, one-time bank payments, such as house or car down payments, tax payments, international payments, and more. ACH is also a cost-effective and popular method in industries where issuing banks decline credit card authorizations for whatever reason, such as legalized internet gambling, sports betting, cryptocurrency, CBD, etc.