Wire transfers and the Automated Clearing House (ACH) network are two of the most popular ways to send and receive money electronically. In fact, both methods are so common that they’re often used interchangeably.
For many applications, wire transfers and ACH are essentially the same. But as a merchant, it’s important you understand how these two platforms differ. Doing so allows you to choose the right payment option for your business.
Let’s take a look.
Wire Transfers at a Glance
A wire transfer is an electronic payment method that allows you to quickly move money between banks. The primary selling point is speed, with most domestic transfers taking one business day.
For international transfers, you might need to wait two or three business days.
Each wire transfer is handled individually by partnering banks — at the explicit request of the sender and receiver. Although much of the process can be automated, you still need human tellers to verify receipt of payment.
ACH Payments at a Glance
With ACH payments, senders and receivers also can move money between banks. Settlements typically take two to three business days to complete, although “next day” processing is becoming more popular.
Whereas banks act as middlemen during wire transfers, the Automated Clearing House network is responsible for connecting sending and receiving parties. Moreover, transactions get processed in batches — instead of individually.
And as the name suggests, the entire process truly is “automated” — without any need for direct human intervention.
ACH and Wire Transfers: Pros and Cons
As an end-user, the above differences don’t really matter. They happen mostly behind the scenes and don’t truly affect senders or receivers.
To understand the relative pros and cons of both payment options, we have to dig a little deeper. More specifically, we’ll look at the payment criteria that typically matter most to retailers and merchants:
1. ACH vs. Wire Transfer: Cost
In the U.S., wire transfers are almost never free for senders. If your bank advertises otherwise, you’re probably using ACH — without knowing it.
- Domestic wire transfers range from $10 to $30
- International transfers cost between $15 and $50
Recipients are sometimes also charged, but usually not. By contrast, ACH is almost always free for ordinary users. As a business owner, however, you can expect to pay about $1 (or less) per transaction.
With this cost difference, ACH is the clear winner — especially when sending smaller amounts. As the payment amounts increase, this difference becomes negligible.
2. ACH vs. Wire Transfer: Security
Both payment options are incredibly secure since they require establishing verified connections between partnering banks.
However, wire transfers are nearly impossible to reverse once a transaction has gone through. As a seller, this can be advantageous if you’re a frequent victim of chargeback fraud.
ACH payments can technically be reversed (this rarely occurs), and banks will authorize reversals only when presented with compelling evidence of an error or fraud.
Wire transfers enjoy a slight edge when it comes to security (for the recipient), but in most cases these two payment options are pretty evenly matched.
3. ACH vs. Wire Transfer: Convenience
The setup process for ACH and wire transfers is quite similar. In both cases, senders and receivers must provide payment details in the form of:
- Banking names
- Account numbers
- Routing numbers
- Payment amounts
No surprises there.
Here are the core differences: With wire transfers, you must go through this initiation process each time you want to send or receive money. A growing number of third-party apps and P2P payment services offer recurring billing services, but often these are just rebranded versions of ACH.
Venmo is a perfect example of this.
ACH, however, was designed with recurring billing in mind. The initial setup is almost identical to wire transfers, but once approved, it’s very easy to continue sending and receiving money on a regular basis.
Because of these differences, ACH is the better choice for smaller, ongoing payments such as:
- Subscription-based services (e.g., monthly utilities or car loans)
- Direct deposit payments to cover employee salaries and benefits
- Personal finance (when transferring money between your banks)
However, wire transfers are a great option if you plan on doing large, one-off transactions. For example, you might have wealthy clients who can afford to buy your luxury sports cars or expensive jewelry without needing installment plans.
Which Payment Option Is Best for You: Wire Transfers or ACH?
As a general rule, wire transfers are best when speed and certainty are essential to your core business:
- Settlements are faster with this electronic payment option
- Once the money is deposited in your account, it stays
For most other cases, however, ACH is the better option. Sending money takes a little longer, and there is always the outside chance that transactions can get reversed — but ACH payments are easier to use. Plus, they cost way less than their wire transfer counterparts.
At BluePay, you don’t have to choose between these payment options, as we support both ACH and wire transfers. This allows you to use the one that makes the most sense on a case-by-case basis.
To learn more about our secure ACH and wire transfer solutions, schedule a free consultation with our merchant services team today.