If the conversation turns to how to send money to someone without using a card, the default option that many think about first is to do a wire transfer. In fact, there’s actually four recognized methods for transferring money in the US, in particular, ACH and wire transfers.
If you have an ACH merchant account you will already know that using ACH is a great tool. It doesn’t deserve to live in the shadow of its main rival offering, wire transfer, and it definitely doesn’t warrant its somewhat outdated reputation.
To appreciate why ACH warrants your attention as a payment method let’s take a look at the fundamental differences between the two options.
The Automated Clearing House (ACH) is a network that exists to enable the transfer of money between bank accounts in the US.
In essence, it’s the digital forerunner of the old-fashioned paper check. Wire transfers are direct transfers between financial institutions. This method is generally used for transferring larger sums of money.
Here’s an overview of how they differ.
Different transfer speed
If you need to send money almost instantaneously wire transfers can often be completed within a matter of minutes. In contrast, the processing time for an ACH transaction can vary.
ACH payments tend to be done in batches throughout the day. That means it can take minutes, or a few hours for the money to be transferred.
More power to recall with ACH
Once you send a wire transfer it’s considered permanent and can’t be canceled once the funds have cleared. ACH transfers can’t be canceled either, but they can be disputed or recalled up to five days later.
This can be useful if you have entered the wrong recipient details and need to get the money back.
Both wire transfers and ACH transactions can be canceled up until the point they are cleared, after that point, you have limited recourse, especially with wire transfers.
Cheaper to use ACH
A key difference between the two services is cost. A consumer using ACH to make or receive a payment does not usually generate a fee as this is absorbed by the business you are transacting with.
Both parties are charged for wire transfers, making it more expensive.
ACH is multi-directional
With ACH transfers you have the ability to either push or pull money in either direction. In comparison, only the sender can initiate a wire transfer.
The option of recurring payments with ACH
You have the ability to set up recurring payments using ACH, but wire transfers are a one-time deal.
Your choice is often influenced by transaction size
When iot comes to issues such as cost and speed of transaction, it often means that ACH is used more frequently to process greater volumes of lower value transactions. Wire transfers tend to be the default option for sending larger amounts.
Geographical constraints
Last but not least, it should be noted that ACH transfers are primarily carried out within the US, with the exception of a few locations where bilateral agreements exist.
Wire transfers are internationally recognized and broadly supported in many countries.
These key differences highlight the fact that both ACH and wire transfers each play a pivotal role within our banking system. Using this knowledge should enable you to choose the most appropriate option when sending and receiving money.
