ACH vs. Wire Transfers: What’s the Difference?

What’s the difference between ACH and wire transfers? While both are ways to electronically send money and make payments, they’re very different processes with their own relative advantages—and disadvantages. Let’s compare ACH versus wire transfers so you can decide how to put one (or both) of these electronic payable solutions to work for your business.

What are ACH transfers?

An ACH transfer goes through the Automated Clearing House (ACH)—hence the name—which processes funds transfers to and from the network’s banks three times each day. ACH transactions are ideal for businesses that process payments in bulk. There are two types of ACH payments: an ACH direct deposit, which businesses typically use for payroll; and an ACH direct payment, which sends money from one bank account to another. You can use ACH direct payments for preauthorized credits, vendor payments, federal and state tax payments as well as for transfers between accounts.

For added control of your business’ ACH activity—and to help reduce the risk of fraudulent activity—there’s ACH Positive Pay. This secure and powerful monitoring tool flags suspicious ACH transactions and alerts you to make a pay or no-pay decision with a simple click.

What are wire transfers?

A wire transfer is also a form of electronic payment, occurring between two banks. Unlike ACH payments however, wire transfers are immediate since they don’t process through a clearinghouse enabling your business to make a same-day transfer into another’s bank account.

What are the differences between ACH and wire transfers?

Both ACH payments and wire transfers electronically move money from one financial institution to another. There are five key differences:

  • Speed. Wire transfers offer same-day funds availability; an ACH transfer can take up to one to two days to process. At FCB, we also offer ACH with same-day functionality; however, ACH transactions typically have a longer processing window, potentially taking several hours.
  • Cost. ACH fees are small in comparison to wire transfer fees. ACH Origination is $10 per batch at FCB which can include multiple payments, while each domestic wire is $20 and each international wire is $40.
  • Security. ACH payments are considered the more secure option because of the ACH network protocols (as well as the Positive Pay tool described above). And if money is sent in error or by mistake, there are ways to reverse the payment. Not so with a wire transfer, which is immediately deposited into the recipient’s account and is difficult to reverse.
  • Global access. While both services send money within the United States, only wire transfers offer international transfers to any international bank.

So, which is right for your business? It may not be an either/or decision. While most businesses won’t use wire transfers as often as ACH payments, those with transactions requiring same-day funds availability or that are involved in international trade may need to use both. At FCB, we offer both of these payment solutions, along with the guidance you need to design a complete cash management strategy that works for your business. Contact us to find out more.