ACH vs Wire Transfers

The terms “ACH transfer” and “wire transfer” are frequently used interchangeably. You may even find the phrase “ACH/wire transfers accepted” on some business websites, making it reasonable to assume the two are the same. While ACH transfers and wire transfers are both electronic funds transfers (EFTs), there are key differences between the two that you should know before issuing payments or deciding what kinds of electronic payments your business will accept.

The Differences Between ACH and Wire Transfers

An ACH transfer is a type of EFT processed through the Automated Clearing House (ACH) network. This network comprises over 10,000 U.S. banks, credit unions, and other financial institutions—members of which process EFTs in batches up to five times daily on a fixed schedule. A single ACH transfer may take a few hours or days to complete. However, institutions may pay a fee to guarantee their transfer is processed the same day it is initiated.

Typically, a debit takes one business day, and a credit takes up to two business days to process. ACH payments have daily limits set individually by each NACHA financial institution. While ACH is a U.S. network, global ACH transfers are possible to and from international institutions that adhere to the National Automated Clearing House Association (NACHA) standards.

Wire transfers are used to send money to and from specific financial institutions, regardless of their membership in ACH. Institutions using the same wire transfer system, such as Fedwire, will share details of the transfer instructions, including the sender’s details and the recipient’s account information. Transfers typically take up to 24 hours to be accessible by the recipient; however, senders may pay extra to send the money more quickly.

The Benefits of ACH Payments vs Wire Transfers

ACH vs Wire – Cost

For several reasons, ACH transfers are frequently used for business payments, such as direct deposit payments to employees and commercial property utility payments. Batch processing makes ACH transfers more cost-efficient than wire transfers. Businesses know when they must make recurring payments and can schedule ACH transfers in advance to meet deadlines. Wire transfers are quicker but cost more. Handling a recurring expense like payroll through wire transfers is far more expensive than ACH transfers.

ACH vs Wire – Security

Further, ACH payments are a bit more secure than wire transfers. It is easier to reverse erroneous ACH transfers than wire transfers. However, whether a wire transfer has been made in error or fraud has been involved, wire transfers cannot be reversed.

ACH vs Wire – Frequency

Wire transfers can be a great option when a business must make a one-time payment, a payment exceeding a business’ daily ACH limit, an international payment, or an instant payment. However, since most of a business’s expenses are fixed and foreseeable, ACH transfers are generally a better option. Moreover, ACH payments are generally free to receive, making them ideal to offer to suppliers and customers as a payment option.

Making the Most of ACH Transfers

ACH transfers can provide businesses with reduced payment processing costs, greater transactional security, and reduced risk of errors or fraud. However, all electronic funds transfers can be time-consuming, risky, and expensive when performed manually. Errors can occur during setup, as well as the ongoing accounts payable and receivable reconciliation and invoice approval processes, especially if your financial team is making ACH payments as they come up.

Streamlining ACH payments through a single platform can improve your business’ processing time while reducing the risk of errors. The right platform will offer heightened visibility and analytics so your team can easily see what payments are being made and received, make smart scheduling decisions, and identify errors and suspicious activity. Using Paymerang, which harnesses the power of Accounts Payable (AP) automation to simplify business payments, can help improve your business’ productivity while reducing costs.

At Paymerang, we offer businesses like yours a simple way to pay all your vendors from one platform, automatic reconciliation, risk mitigation, and a robust analytics platform to help you make better decisions and mitigate risk. Contact us today to learn more and schedule a demo.

John Heyel

John Heyel

John leads finance, accounting and investor relations at Paymerang, applying rigor and analytics to our business planning, decision making and execution. He ensures we process each client transaction accurately and efficiently to maintain order over the hundreds of thousands of payments and billions of dollars flowing through our company. John honed his leadership skills as an officer in the U.S. Navy before moving on to lead finance and analytical teams in banking and credit card operations at Capital One. John spearheaded major initiatives through a period of rapid growth at Capital One within the areas of corporate planning, retail operations, external reporting, and controllership.