ACH vs. Wire Transfer – What’s the Difference?

ImageWhen it comes to transferring large sums of money from one account to another there are a number of options. Traditionally, there’s your good ol’ checkbook, but checks can bounce, be rejected for insufficient funds or even be lost outright. Cashiers checks carry many of the same risks as traditional checks in addition to the concern surrounding the fact that funds are already pulled from your account. Sending cash through the mail can be even riskier still.

To avoid the security concerns attached to checks and cash, ACH (automated clearing house) transfers and wires are really the way to go when you’re moving more than a few hundred dollars between accounts. But what’s the difference between an ACH and a wire transfer?

ACH Transfers:
Automated clearing house payments operate similarly to a traditional check, but without the risk of a paper check itself. An ACH, in its simplest terms, is just a digital transfer of funds directly from one bank account to another. The process generally takes 2-3 business days and transfers are subject to traditional banking operation hours. For example, an ACH payment that is placed after 3pm on a Thursday will likely not show in the payee’s account until Monday.

The main benefit behind ACH payments are their secure nature. As no paper check exists, funds are simply transferred via a secure data line between the originating bank, the clearing house and the deposit bank. Banks also charge a significantly smaller fee for ACH transfers – generally only a couple of dollars – when compared to wire transfers.

Wire Transfers:
Wire transfers operate very similarly to ACH payments with a few exceptions. While a wire is still sent digitally through a secure data line, funds from a wire transfer act more like a cashiers check. While ACH payments take 2-3 days to process, wire transfers are available at the close of the business day on which they are sent. Because the funds are available almost in realtime, banks generally will charge a higher fee to process a wire transfer – often in the neighborhood of $20. However, if you’re on a tight deadline that extra fee is generally worth it to have sent funds available almost immediately.

Regardless of the method you choose to have your funds transferred, it’s important to remember to do your homework on where money is being sent. Online escrow services are a great way to ensure that your electronically transferred funds don’t simply disappear into thin air when dealing with an unknown seller.

For more tips on wire and ACH transfers, check out these sources:

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One comment

  1. If you’re looking to find a swift code for the bank you’re trying to send money to, you can use: http://bank-code.net/

    It list all banks in the world and their associated swift code, along with a breakdown of the actual swift code so that you can understand what it means.

    Here’s an example for BARCLAYS BANK PLC bank located in NEW YORK: http://bank-code.net/swift-code/BARCUS33XXX.html

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