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ACH vs Wire Transfers: What Is the Difference?

ACH vs Wire Transfers: What Is the Difference?
Sulaiman Abdur-Rahman
Sulaiman Abdur-RahmanUpdated June 9, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Automated Clearing House (ACH) and wire transfers are electronic payment services. ACH transactions are made through the ACH Network, while wire transfers are made through a wire service.An ACH vs. wire transfer each serve the same purpose, but there are some differences between a wire transfer vs. ACH. The biggest difference between ACH and wire transfers may be the cost.Financial institutions may charge hefty fees to process a wire transfer. Some banks may charge $95 per transfer to wire money domestically from your business account and $35 per transfer to wire money from your personal account. ACH, meanwhile, is generally a more affordable way for businesses to accommodate electronic payments.Businesses may use ACH to accept automatic payments or one-time payments for goods and services. A same-day ACH can transfer funds from bank to bank in several hours, rivaling the speed of a domestic wire. Below we highlight the unique aspects of an ACH vs. wire transfer.

What Is an ACH?

An ACH transaction is an electronic funds transfer conducted over the ACH Network. The ACH Network is governed by Nacha, an organization that sets the rules for how consumers, businesses, nonprofits, and government agencies may use ACH for transactions.Businesses may accept ACH payments from customers, and employers may use ACH to pay their employees via direct deposit.Certain information is required to set up direct deposit, including your bank’s routing number. What is a routing number? A routing number is a nine-digit code that serves as an address for your bank.Businesses can pay ACH service fees if they want to pay vendors and employees via direct deposit. The median cost of initiating and receiving an ACH payment is between 26 cents and 50 cents, according to a 2022 survey of businesses. Consumers may need a checking account or savings account to make one-time payments or recurring payments via ACH.Recommended: Guide to Setting Up Direct Deposits

How an ACH Works

ACH uses a batch process and store-and-forward system to facilitate electronic payments over the ACH Network. Below we highlight the typical steps of an ACH transaction: 
  1. A consumer (or originator) agrees to make an electronic payment to a merchant (or receiver).
  2. The consumer gives payment instructions to a bank (or originating depository financial institution).
  3. The consumer’s bank sends the payment to an ACH operator (a Federal Reserve Bank or the Electronic Payments Network).
  4. The ACH operator distributes the payment to the merchant’s bank (or receiving depository financial institution).
  5. The receiving bank posts the payment to the merchant’s bank account.

What Is a Wire Transfer?

A wire transfer is an electronic transaction made through a wire service. The Clearing House Interbank Payments System (CHIPS) and Fedwire are examples of a wire service. You may wire money in U.S. dollars or foreign currency from your eligible checking, savings, or money market account.A wire transfer is generally a quick and secure way to send money through the banking system. In terms of wire transfer vs. ACH transactions, wire transfer is typically more expensive.Recommended: Guide to Transferring Money

How a Wire Transfer Works

A wire transfer works by giving your bank instructions to transfer funds from your eligible bank account to another person’s bank account. The transaction uses an electronic wire service to send money directly to the recipient’s bank account. You may send wire transfers at your local banking branch or online.Wiring money to another person’s bank account is not as simple as withdrawing money from your savings account. You typically need a person’s name, address, and bank account details to send that person a wire transfer of money. Recommended: Wire Transfer vs Bank Transfer: What Are the Differences?

Example of an ACH Transfer

Electronic transactions known as ACH credit and ACH debit occur through the ACH Network. Getting paid via direct deposit is an example of ACH credit. Making automatic or recurring payments on a utility bill is an example of an ACH debit.

Example of a Wire Transfer

Giving your bank instructions to wire money from your U.S. checking account to another person’s U.S. checking account is an example of a domestic wire transfer. Sending money from a U.S. bank account to a foreign bank account is an example of an international wire transfer.

Main Difference Between ACH and Wire Transfers

Below we highlight the difference between ACH and wire transfers:

Cost of Service

As mentioned earlier, the cost of ACH is generally more affordable than the cost of wire transfers. The median cost of initiating and receiving an ACH payment is between 26 cents and 50 cents, according to a 2022 survey of businesses that use ACH. Domestic wire transfers, meanwhile, may cost $35 per transfer on personal accounts and $95 per transfer on business accounts.

Speed of Service

Banks can process wire transfers relatively quickly, whereas standard ACH transactions may transfer money within a day or two. Same-day ACH service can rival the speed of a domestic wire transfer.

Rules of Service

ACH is governed by Nacha-approved rules, which don’t necessarily apply to wire transfers. Financial institutions are generally subject to state or federal regulations. Banks may determine their own fee schedules, including the cost of domestic wire transfers, international wire transfers, and online wire transfers.

The Takeaway

You can make electronic payments through ACH or wire transfer. The difference is that wire transfers may move faster and be more expensive than ACH transactions.If you’re looking to open a top savings account, Lantern by SoFi can help. Our online banking marketplace makes it easy to compare annual percentage yields and choose a bank account that’s right for you.Compare today’s high-yield savings rates including fees and balance minimums.

Frequently Asked Questions

Which is safer ACH or wire transfer?
Can a bank reject an ACH payment?
What is the maximum ACH transfer limit?
Photo credit: iStock/Makhbubakhon Ismatova

About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and served as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.
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