ACH vs. Wire Transfer: Understanding the Differences

4 min read

Two of the most common types of bank transfers are ACH and wire transfers. Any business that sends or receives money from global partners is likely familiar with one or both of these—they’re cornerstones of digital commerce. But what makes them unique? Understanding the difference between ACH and wire transfers can save a business time, money and potentially, unwanted headaches.

Need to send a large sum of money to a supplier? Pay your employees today? Set up recurring payments to a different country? Your situation will dictate which option is right for you. Here’s a rundown of ACH vs. wire transfers.

What is a wire transfer?

A wire transfer is a safe way of transferring money directly between two banks or credit unions. This money is transferred using a network like SWIFT, CHIPS or Fedwire. In most instances, businesses use wire transfers when sending large sums of money, when sending money internationally, or when time is of the essence. 

The benefits of wire transfers

Wire transfers have three chief benefits. They allow businesses to send large sums of money, securely between institutions, quickly. Virtually every major bank in the world offers wire transfers, alongside credit unions and even some financial services companies. 

The drawbacks of wire transfers

Wire transfers can quickly become expensive. Typically, they range from $15-$50. International wire transfers are especially costly when you consider currency exchange. Keep in mind that it’s also virtually impossible to stop or reverse a wire transfer. Businesses need to double-check the amounts they’re transferring and the recipient into before executing the transfer. This is also why wire transfers require full recipient banking information to process.  

When to use a wire transfer

Wire transfers are best used sparingly, for large sums of money or for sending funds that need to be processed quickly. The high costs associated with wire transfers makes them a sparing tool—one that most small businesses should avoid whenever possible.

What is an ACH transfer?

Automated Clearing House (ACH) is an electronic banking payment rail that’s accessible to any business with a bank account. ACH is similar to a wire transfer, but has some important differences. These transactions typically take a few days to process and have a limit on the funds available for transfer—but they’re usually free to execute! 

The benefits of ACH transfers

ACH transfers can be convenient for reoccurring transactions. They allow businesses to set up a direct deposit system, which paves the way for recurring payments at regular intervals. On top of this, there’s no cost to process an ACH transfer. Businesses can send multiple ACH transfers to a wide array of recipients, domestic or international, with few worries once the destination account is established. 

The drawbacks of ACH transfers

ACH transfers have a limit on the amount of money businesses can transfer at one time. On top of this, ACH transfers can take multiple business days to process and have a daily window for when funds will process. Depending on the destination, it could take as long as 7-10 days for those funds to land. Finally, banks may reverse international ACH transfers, flag them or put a stop on them if there’s suspicion. The best way to avoid this is to notify the bank of international recipients and establish clear payments to those recipients. 

When to use ACH transfers

ACH transfers can be a great tool when used in the right situations. If your business has reoccurring payments, tends to make frequent small transfers, or if you are looking for the least expensive way to transfer money, An ACH transfer is likely the best option. They’re also ideal for a wide array of use cases, including direct deposit for employee payments or for one-off vendor payments. 

The bottom line: which option is best?

There’s no one best option when it comes to choosing between an ACH and wire transfer. Instead, it’s best to consider the situation. Knowing which transfer to use in the right situation makes funds transfer much easier for businesses.

Wire transfers should be the go-to when transferring large amounts of money, or when there’s special need for additional speed and security in moving funds between accounts. ACH transfers are optimal for regular business transfers to established recipients. Keeping both payment options in mind when the time comes to move money is a great way to make sure it gets to where it’s going in the most efficient, affordable way possible. 

Did you know there’s another option, too? Digital payments offer the benefits of both wire transfers and ACH, with features that bring even more transparency and affordability to funds transfer. If your business doesn’t already use digital payments, make it a priority to investigate a digital payment solutions provider like Veem!



* This blog provides general information and discussion about global business payments and related subjects. The content provided in this blog ("Content”), should not be construed as and is not intended to constitute financial, legal or tax advice. You should seek the advice of professionals prior to acting upon any information contained in the Content. All Content is provided strictly “as is” and we make no warranty or representation of any kind regarding the Content.