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ACH vs. Wire Transfers: Compare Speed, Cost and Security

There are many ways to move money between accounts at different banks.

You can withdraw cash and carry it to the other bank, write a check and let the banks handle the transaction, or make an electronic transfer.

Two popular methods of moving money between accounts are ACH (Automated Clearinghouse) transfers and wire transfers.

Both of them get the money where it needs to go but there are differences between them that are important to keep in mind.

ACH vs. Wire Transfers

ACH transfer Wire transfers
Typically, takes 1-3 business days to complete Completes within 24 hours; usually, instantly
Cheap and usually free Expensive, especially for outgoing international wire transfers
Transfers and payments can be reversed, stopped or cancelled Very difficult to track and reverse

ACH Transfers

ACH Transfers are an electronic method of moving money between banks. Automated Clearinghouse is one of the largest payment networks in the United States.

Banks frequently use ACH transfers when processing direct deposits, peer-to-peer payments, and bill payments. Banks can process the transactions in one of two ways.

Debit transactions involve a third-party pulling money out of your account.

This is what happens when you open your credit card issuer’s website and make a payment through your credit card account portal. It’s also what happens when you set up automatic bill payments with a service provider.

Credit transactions involve pushing money out of your account to a recipient. This happens when you make a peer-to-peer payment or use your bank’s bill payment function.

ACH transfers usually take several days to process and your bank may place a hold on the funds after they arrive. Banks may place holds because ACH transactions can be reversed. 

ACH transfers are also relatively cheap. Most banks charge no fee for debits and only a small fee, if they charge a fee at all, for credits.

Wire Transfers

Wire transfers use a different network to send money between banks electronically. 

The benefit of wire transfers compared to ACH transfer is that wires are much faster.

Typically, the transaction takes minutes, to go through, instead of days.

Banks rarely place holds on funds that arrive from a wire transfer because they cannot be reversed.

Wire transfers, because of their speed, cost more than ACH transactions.

It’s not unusual for U.S. banks to charge fees of $25 to $50 to process outgoing and incoming wire transfers.

Differences

There are a few key differences between ACH and wire transfers.

Two of the key ones are speed and cost.

Speed

ACH transfers are the slower of the two types of transactions.

It can take a few days for the ACH network to process ACH transfers, meaning you can’t rely on them if you need to move incredibly quickly.

Wire transfers often move money between banks within the same day, though international wire transfers usually take an extra day or two.

Cost

To compensate for their low speed, ACH transfers are far cheaper than wire transfers, making them the transfer of choice for most purposes.

People tend to use wire transfers only when speed is essential for a transaction.

Security and susceptibility to fraud

Security and fraud are another major difference between ACH transfers and wire transfers.

ACH fraud involves unauthorized transactions that occur using ACH transfers.

Because the ACH system allows debit and credit transactions, it can be easier for fraudsters to commit fraud through ACH transactions.

If someone can find your account number and your bank’s routing number, they may be able to initiate an ACH transaction that pulls funds from your account.

Sometimes, scammers will use other tactics, such as phishing, to gain access to online bank accounts and submit transactions through a bank’s online portal, transferring funds to accounts at other banks before withdrawing the money and disappearing.

To recover money lost due to ACH fraud, account holders must notify their bank within 60 days of the fraudulent transaction.

Wire fraud can be more difficult for scammers to pull off but it is more difficult for someone to recover from.

With a wire transfer, a third-party cannot pull money out of someone’s account, so scammers must convince someone to initiate a transaction to send funds to their account.

Once a wire transfer goes through it is nearly impossible to reverse, making wire fraud more financially damaging than ACH fraud.

Scams

There are many popular scams used by perpetrators of wire fraud. Knowing the common tactics and how to avoid them is essential to avoiding wire fraud.

One of the most well-known scams is the advance-fee scam.

The scammer will send a message to their target, asking the target to wire transfer some money to the scammer’s account. In exchange, the scammer promises to pay large sums of money after they receive the advance.

Often, the scammer poses as a temporarily down on his luck member of foreign royalty who needs money to return home or regain access to his bank account.

As soon as the target wires money to the supposed royal, the scammer disappears, never to be heard from again.

Because wire transfers are almost impossible to reverse, it can be difficult for victims of wire fraud to get their money back and for the police to find and punish scammers.

A good rule of thumb:

To avoid scams, never send wire transfers to a person or business who you do not know well.

If someone asks you to send a wire transfer, it’s probably better not to unless you are the one initiating and planning the transaction.

Which One Should You Use?

For typical everyday banking, you will likely use ACH transfers to move money around.

They are far less expensive than wire transfers and they only take a few days to process.

Add the fact that they’re easier to reverse, which makes it easier to avoid fraud.

The primary advantage of wire transfers is their speed.

If you absolutely have to complete a transaction in a day, then a wire transfer can help you send your payment quickly.

However, there are few situations where speed is so essential, and the cost of wire transfers means that you’re typically better off with the cheaper option.