Automated Clearing House (ACH) and wire transfers are two of the most popular payment methods used by businesses across the world.

One of the crucial differences between these is that ACH can take slightly more time, while wire transfers are much faster and more costly too.

Now, before we move on to ACH vs wire transfer payment, let us briefly see how each process works.

How does ACH work?

ACH is used to process transactions like direct debit and direct payments. If you are a business owner, you can also use ACH to pay your vendors and employees. This transfer clears the bank in a few days when there are sufficient funds in the account. Transactions might take longer in a few circumstances, for example, when the system detects a fraudulent transaction.

There are two types of ACH transfers:

• Direct deposits- This is initiated by the payer to send funds directly to the receiving account. For example, when the employer wishes to pay wages to the employees.
• Direct payments- This is initiated by the receiving account to request funds. For example, automatic payment set-up for recurring bills.

How does wire transfer work?

A wire transfer can be described as an electronic payment service that helps to move money between the accounts. Here, the service is premium and money can be transferred on the same day, but its charges are higher. It is mostly used by people to make hefty one-time payments that might require same-day processing.

There are two types of wire transfers, namely domestic and international. Depending on the location of the receiving account, the delivery time and charges might vary. International transfers are more expensive than domestic ones.

Now, we shall find out more differences between ACH and wire transfer.

• Availability- While the ACH transfer only works in the case of domestic transactions, you can send money internationally through wire transfers.
• Security- When it comes to security, both of them have a stronghold on it. Financial institutions that handle both these transfers offer an added security layer. Also, the information is encrypted during the banking process. While you can cancel an ACH transfer easily, canceling wire transfers can be a bit difficult- the process is quite fast and to stop it you will practically have to race against time.
• Transfer limits- depending on your bank or financial institutions, there are transfer limits for both ACH and wire transfers. You would need to check that out personally.
• Processing time- As mentioned earlier, ACH transfers can take one or more days. In case of wire transfers, the processing time is very less as the whole transaction takes place on the same business day.
• Posting times- When you opt for ACH, it would take some time for you to access the fund, even if it has hit your account. It would appear in “pending” status and won’t be available for use until the ACH system is cleared. The whole process might take up to three business days. But for wire transfer, you can instantly access the funds whenever it hits the account.
• Reversals- ACH transfers can be reversed in case of an error. However, wire transfers are permanent. It means once it is initiated, there are no options for reversals.
• Fees- As wire transfers are fast and you will be able to access the account instantly, its fee is on the higher side. Recipients too are sometimes charged nominally for an incoming wire transfer. However, ACH transfers are mostly free, but you can expect to pay a fee for expedited bill pay services or if you are transferring the money outside your bank.

The right choice between both these transfer processes depends on your purpose. Review their processing time and fees individually. While ACH transfers might take a bit longer, they are free. Whereas for wire transfer, you need to pay a significant amount of money but the whole process will take place much faster. So depending on your preference of whether you want to save money or time, you can choose any one payment. Both of them are quite secured, and your money will be transacted safely, whatever the process you are availing.