When speed is a priority, a wire transfer is the way to go. Thanks to technology, you can send money electronically through a bank network and it will be received instantaneously.
Wire transfers are not to be confused with ACH (Automated Clearing House) transfers. They do share some similarities -- both are done electronically and require bank accounts.
"One key difference is speed. Once a wire transfer has been authorized, the receiver has access in minutes, but with ACH it’s typically the next day," explains Viveca Ware, executive vice president regulatory policy for the Independent Community Bankers of America.
Wire transfers come with a price tag, typically $35 for an outgoing and as low as $5, but can be $10-$15, for incoming transfers, to cover the cost of labor associated with the transaction, says Ware. There is no charge for ACH.
"Sometimes the fee is waived depending on the customer’s relationship with the bank," she adds.
Translation: the big money gets a break. For example, CIT Bank offers free outgoing wire transfers for customers with balances of at least $25,000.
Wire transfers make sense for one-time events, where there is significant money involved, like a purchase of a car or home, "Whatever transaction where finality and speed are important," says Ware.
"Wire transfers can be used to transfer money to another individual or business, including banks, like for funding a CD," says David Bakke, a financial columnist with MoneyCrashers.com.
You can fund a mature CD with a wire transfer and also transfer money from our account to another person’s account (regardless of the financial institution). Unlike an ACH, because an ACH is done by a vendor, or someone or company with a program required to process ACH. They can’t be done by individuals, says Leslie Tayne, an attorney specializing in financial issues for the Law Offices of Leslie Tayne.
ACH is usually for a recurring transaction like direct deposit of payroll. It is also usually done when there are multiple payments. ACH may also require money in reserve, points out Tayne.
Despite the $35 fee, wire transfers can be money well spent. "Especially if you’re doing a cross border transaction, a wire transfer is much better than dealing with a foreign check,"says Susan Grant, director of consumer protection for the Consumer Federation of America.
For sure, wire transfers are easy and convenient, but like any financial transaction, there are a few things to keep in mind.
Ask questions. "Find out if there are fees and how much and be sure that the amount of money coming out of your account is the right amount," says Grant.
Find out what it takes to get a fee waived, like if you need to have a certain balance, or multiple accounts, whatever the case may be. "In a very few select instances, some banks offer premium accounts where there’s no fee for incoming or outgoing wire transfers," says Bakke.
Shop around. While most banks charge a fee for incoming wire transfers, Bakke says some don’t, like Ally, Discover and Everbank. Credit unions also typically don’t charge for incoming wires, says Tayne.
No do-overs. "Be aware that with wire transfers once you transfer the money it is gone, but with ACH, you can always pull it back if the amount is wrong, or was not authorized. ACH has more protections in a way," says Tayne. "Try to avoid using online wiring like a PayPal because it can take more time for the money to clear, whereas, the wire is more likely to hit the same day if you go through your bank."