Individuals and businesses need to transfer money – it’s just a fact of life. But what is the best, most efficient way for you to transfer money? From small, one-time payments to large and regular installments, there are multiple options for moving money from one place to another. 

Today we’re talking about the two most common ways to transfer funds electronically – ACH transfer and wire transfers.

What is an ACH transfer?

Automated Clearing House transfers, or ACH transfers, are electronic transfers between accounts that pull or push funds according to requests. ACH transfers have exploded in popularity over the last decade due to their convenience and accessibility. 

Examples of ACH transfers:

  • Direct Deposit
  • Automatic Bill Pay
  • Bank-to-Bank transfers
  • Paypal, Venmo, Zelle, and other P2P (peer-to-peer) platforms

ACH transfers are submitted via a large, secure network of organizations in batches 1-3 times per day. The automated clearinghouse is the middle man of the transaction, and provides a stopping or waiting point between parties. Transfers can be “pushed” from an account or “pulled” to an account, depending on the party initiating the request for transfer. Payments can be on demand or automated for regular submissions.

What is a wire transfer?

A wire transfer is a more direct and instantaneous transfer of funds between parties using a different network – usually SWIFT or Fedwire. Wire transfers are conducted individually and are completed on a demand basis. While some can be completed online, most wire transfers are initiated more formally through a bank or nonbank institution as a solitary and more direct transaction. 

Wire transfers are initiated and completed by only one party – the sender. They also have different costs and requirements for information to complete the transaction, but they have additional benefits such as international and size capabilities unique to a wire transfer.

Are ACH or wire transfers safer?

How secure do you need this transaction to be? If safety and security is a primary concern, then carefully researching the difference between ACH transfers and wire transfers is important.

Both ACH and wire transfers are safe. ACH gives more protection to senders, and wire transfers touch fewer hands.

ACH transfers are monitored by the Federal Reserve and run through an automated clearinghouse between parties, which means they are considered to be safe and provide means for reversal if something is incorrect. You may consider ACH transfers more secure if you want more control over the funds and process, including getting your money back if there are errors or miscommunications. International ACH transfers are more limited and less secure.

Wire transfers are generally considered to be more secure – but only if you’re certain about the destination of the wire transfer. Wire transfers are permanent and irreversible, as well as nearly immediate. Wire transfers are more trustworthy across international borders, and generally a better idea if you need the funds to arrive by a scheduled time and without complication.

Is an ACH or wire transfer faster?

Wire transfers are faster than ACH transfers. Wire transfers take only hours while ACH transfers take between 1-3 business days to clear.

The most common question regarding electronic money transfers is how fast one can expect the funds to be available from the transaction. When will I get my money? When will this outstanding invoice be resolved? It will depend on which type of transfer you choose, but usually wire transfers are going to get there faster. 

ACH transfers are growing faster and faster as technology evolves. Where automated clearinghouse transfers used to batch the transactions once per day, now the batched transfers are going through multiple times a day, and even on non-business days to satisfy customer demand for faster funds transfers. Still, you can expect ACH transfers to take longer than wire transfers. Most ACH transfers will take 1-3 business days to clear. 

Wire transfers are much more rapid, making them a better choice when time is of the essence. Wire transfers are generally same day, and can even be accessible within hours depending on the response of the receiving bank. If you need your funds to arrive fast, a wire transfer is the natural choice – but you’ll pay more for that speed.

When to choose an ACH or wire transfer

Thankfully, you’ll have lots of options when it comes to choosing methods for delivering money from one party to another. Cash or check are still options, but electronic transfer of funds are far more common and provide more flexibility. Here’s our helpful guide for choosing ACH or wire transfers.

Advantages of ACH and wire transfers

ACH transfer Wire transfer
Convenient & accessible Additional security
Can set up as recurring International
General bill pay Large funds
Free/minimal cost Rapid delivery
Send & request Sender solely responsible

Wire transfers are usually favored for large, critical, and/or international transfers. ACH transfers are more common and daily — great for your more regular money movements.

Money transfers for business

Businesses have a frequent need to transfer funds. They may send and accept huge batches of payments each day, as well as larger, more critical transactions such as real estate or company acquisitions. What’s the best way to efficiently manage your business funds? 

The money managers of your business should carefully research the differences between ACH vs. wire transfers, and then consider ways to utilize these methods to increase efficiency.

Compare the types of common business money transfers

Checks: Paying bills and invoices with physical checks is not only old school – it’s financially inefficient. You’re paying for checks and mailing fees, as well the employee time to physically send the payments. Then you’re waiting for the checks to be delivered, opened, and deposited.

ACH transfers: For regular bill pay and small, local payments (such as invoices) an ACH transfer is the best way to manage money efficiently. Business owners can set up recurring payments and enjoy electronic tracking and recording. Divvy Bill Pay is a free service that provides real-time updates to budgets and complete control over which payments are submitted on specific days and from specific accounts. Divvy uses ACH transfers to seamlessly integrate your AP without an extra system of recording.

Wire transfers: It’s likely your business will have need of fast, reliable, large, and/or international payments at some point. Maybe you’re closing a real estate transaction and need to send a down payment, or you’re acquiring another company or asset. A wire transfer is likely the best option for these types of business transactions. Get large sums of money to the appropriate party same-day to ensure smooth cash flow and trustworthy business relationships with rapid wire transfers.

Money transfers are a critical part of any business or individual’s cash management, but they’re also an element best streamlined and forgotten so you can focus on what matters. With our help, we hope you can now make the best decisions for your money management – however you decide to transfer funds.

Ready to learn more about spending smarter? Request a demo of Divvy.

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