ACH Transfer vs. Wire Transfer: What’s the Difference?
ACH transfers and wire transfers both offer ways to send money electronically. However, there are some core differences between the two. Here’s a closer look at what separates an ACH versus wire transfer, so you can know which is the best fit for your specific needs.
ACH vs. wire transfer at a glance
Here’s an overview of the differences between these two money transfer methods.
ACH | Wire | |
Common transaction types | Bill pay, direct deposit, peer-to-peer (P2P) payments | Real estate transactions, large purchases, overseas payments |
Domestic/international destination | Primarily domestic | Domestic and international |
Speed and delivery time frame | Slower delivery speed with flexible time frames | Fast turnaround for larger amounts of money |
Typical fees | Lower fees | Higher fees |
Transaction limits | Lower limits | Higher limits |
Ease of reversal | Can be reversed | Cannot be reversed unless under special circumstances |
Likelihood of fraud | Susceptible to fraud | Susceptible to fraud |
What is an ACH transfer?
Automated Clearing House (ACH) transfers are financial transactions that occur between banks or credit unions. The ACH system is a nationwide network through which financial institutions can send each other electronic credit and debit transfers. ACH is commonly used for the following types of transactions:
- Paycheck direct deposits
- Government-funded direct deposits, such as tax refund payments
- One-time electronic bill payments
- Recurring debits, such as automatic bill payments
- Buy now, pay later (BNPL) payments, such as Klarna or Affirm
- (P2P) payments, such as Venmo, Cash App or Zelle
How ACH transfers work
As a broad overview, ACH transactions work like this:
- The ACH recipient gives the ACH provider permission to send them money electronically and provides their banking information.
- The ACH provider initiates an ACH request for payment.
- That request is grouped in a file with all the other ACH requests for the day.
- The file is sent to an automated clearing house for processing.
- Once the requests are processed, the clearing house sends a batch of deposit requests to the receiving bank or credit union.
- The bank or credit union debits the requested amount to the ACH recipient’s account.
Example of an ACH transfer
Here’s an example of how ACH transfers can be used to fund direct deposits:
- Whenever you start a new job, you’ll likely give your employer permission to send you direct deposit payments.
- At the end of each pay period, the payroll department will initiate an ACH request for payment for you and all other employees enrolled in direct deposit.
- Those requests will be sent in one batch to an Automated Clearing House for processing.
- Once they are processed, the payment request will be sent to your bank. Your bank will then debit the amount of your paycheck into your account.
What is a wire transfer?
Wire transfers are a way to electronically transfer money from one bank account to another. When the transfer occurs between two U.S. banks, the transaction is known as a domestic wire transfer. When the transfer happens internationally, it’s known as an international wire transfer, or remittance transfer.
Remittance transfers over $15 have certain protections under federal law. For example, you have up to 30 minutes to cancel a remittance transfer at no charge and, if you make an error on your remittance transfer, you have up to 180 days to notify the provider of the mistake. In that case, you may be eligible for a refund following an investigation.
How wire transfers work
During a wire transfer, the two involved financial institutions communicate directly to transfer the funds between the accounts. Typically, the person initiating the wire transfer will be responsible for providing the necessary information, including:
- The bank account number of the wire transfer recipient
- The wire transfer recipient’s bank routing number
- The wire transfer recipient’s bank address
It’s extremely important to verify this information before sending a wire transfer because you may not be able to get a second chance at sending the money. Double-check the details before initiating the wire transfer, and ask the bank to send you a receipt for the transaction.
Once the bank has the information, it will deduct the requested amount from the sender’s bank account. The receiving bank will then credit that amount to the recipient’s bank account.
Example of a wire transfer
Wire transfers can occur during real estate transactions. Let’s say you’re asked to wire $35,000 to cover your down payment and closing costs.
Your closing agent will likely provide you with the recipient’s bank and account information, which you will then be asked to bring to your bank.
Once you’ve provided all the necessary information, your bank will deduct $35,000 from the high-yield savings account where you have been putting money away to buy a home. The recipient’s bank account will be credited that same amount within a few hours.
7 main differences between ACH transfers and wire transfers
There are several common differences between ACH transfers and wire transfers. However, the specifics can vary greatly between different account types and financial institutions. If you have questions about sending money, check with your bank or credit union for clarification about its services.
1. Types of transactions
ACH payments are typically used to send small amounts of money domestically. You might use an ACH payment to pay bills, send money to friends and family, or receive paycheck funds from your employer.
Domestic wire transfers are traditionally used for larger payments with tighter payment time frames, such as buying real estate or a car. However, wire transfers can also be used to send cash payments internationally.
2. Domestic or international destinations
ACH transfers are commonly used to send cash payments domestically. Although international ACH payments are possible, they are not as common.
Wire transfers are more commonly used when sending money internationally. Wire transfers can be sent anywhere in the world except for certain countries sanctioned by the United States, including Russia, Iran and North Korea.
3. Transaction speed and delivery time frames
Although same-day ACH transfers exist, they often can take up to two banking days to complete.
In contrast, domestic wire transfers typically occur on the same day, as long as the wire transfer is initiated no later than 2 p.m. Eastern time Monday through Friday. However, international wire transfers may take up to 10 business days to complete.
4. Typical fees
As a rule of thumb, ACH transfers tend to have lower fees than wire transfers. In many instances, ACH transfers may be free. You may only incur a fee if there’s an atypical circumstance, such as if you opt for a faster transfer or have insufficient funds to complete the transaction.
Wire transfers, on the other hand, are more costly. Banks typically charge fees for these transactions, though the amounts can vary depending on whether it’s an international or domestic wire transfer, as well as if it is incoming or outgoing.
Here’s an overview of how much you can expect to pay for a standard wire transfer:
- Outgoing domestic wire transfers: $20 to $35
- Outgoing international wire transfers: $35 to $50
- Incoming wire transfers: $0 to $16
5. Transaction limits
In either case, you may face limitations on the amount of money you can transfer in a given time period.
ACH transfers tend to have lower limits, although the specific limit may vary depending on the financial institution and the activity. For example, you’ll likely face different limits when paying a bill through your bank as opposed to paying a friend on a P2P platform.
Wire transfers tend to have higher limits, but you may be required to take some extra steps when making a large transfer. For example, you may have to call your bank or visit a branch in person.
6. Ease of reversal
In general, ACH transfers are much easier to cancel or reverse. The transaction can often be righted in certain cases, such as duplicating a payment or sending a transaction to the wrong account.
Wire transfers, however, typically cannot be stopped or reversed once the transaction has been approved by the financial institution. That’s why you may encounter additional scrutiny, such as having to provide proof of identity before sending this type of transfer.
7. Likelihood of fraud
Both ACH and wire transfers are susceptible to fraud. In recent years, scammers have attempted to divert direct deposit or vendor ACH payments from government agencies.
However, wire transfer fraud has been around for a long time. Scammers may try to convince you to wire money to a loved one in need, only for you to find out that there was no emergency once the money has been sent and cannot be returned.