Q: If I want to send money to a customer at another bank, what’s cheapest way to do this? I know there are various ways to transfer money. Do I have to pay for a wire transfer or is it free of charge?

– Sobirjon T.

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A: In general, there are three main electronic methods of transferring money to a customer of another bank: ACH transfer, wire transfer and electronic transfers via third-party systems.

ACH transfer

ACH stands for Automated Clearing House, an electronic network used by financial institutions to process transactions in batches. Because ACH transfers are automated, they are rather inexpensive for banks and they tend to be free for customers (but some banks and institutions may impose a small fee, depending on the transaction).

The typical ACH transfer takes a few days to clear because it requires confirmation and by the receiving party.

Examples of ACH transfers include payroll direct deposit, online bill pay, distribution of Social Security benefits and person-to-person (P2P) payments.

Wire transfer

Unlike the batching-processing nature of ACH transfers, wire transfers are designed for individual transactions. Wire transfers involve more interaction between the institution that sends and receives the money, which is why wire transfer fees (usually a flat fee ranging from $10 to $50 or a percentage of the transferred amount) are typically more expensive than other forms of money transfer. Wire transfer fees may be charged to the sender, the recipient or both.

The biggest benefit of wire transfers is speed. You can send money to a person located halfway around the world in a matter of minutes instead of days.

Banks, credit unions and some financial services providers (e.g., Western Union and Moneygram) offer wire transfers — their fee policies may vary. Wire transfers to foreign institutions tend to cost more than domestic wire transfers.

Transfer MethodCostDelivery Time
ACHUsually free3-7 Days
Wire Transfer
-BankAvg. of $26.40 for domestic outgoing transfers at the 10 largest banks in the U.S.1-3 Days
-Credit UnionAvg. of $17.30 for domestic outgoing transfers at the 10 largest credit unions in the U.S.1-3 Days
Third-party providersVariesVaries

Third-party providers

Other portals to send money electronically include e-commerce entities like PayPal, Dwolla and others. These companies allow users to send and receive money, possibly without fees associated with ACH and wire transfers. However, many consumers don’t use them because of the time and effort to set up accounts.

PayPal doesn’t impose a fee when a customer sends money to another PayPal user through a linked bank account. Dwolla charges only 25 cents per transaction over $10, and any amount less than that is free.

As for the cheapest option to send money to someone, it would most likely be ACH transfer. Wire transfers would be the way to go if a transaction is urgent. Services like those from PayPal and Dwolla could be a better option if you and the recipient have user accounts.

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  • Mac

    Very interesting and somewhat understandable. I did not see any reference to international transfers.

    • Roallin

      It is covered under wire transfers.

  • Jhon

    Is it possible to use ACH for fund transfer to banks outside the country. Esp if I want to pay someone outside my country. I’m from USA.

    • Simon Zhen

      No, the ACH network only facilitates financial transactions in the United States. If you want to pay someone internationally, you may have to go with wire transfers or PayPal.

  • bitcoin.org

    Or you could use bit coins to send money anywhere in the world instantly for 4cents.

  • carlos bello

    Hey ,first of all thanks for this post it had allowed me to understand the different types of transactions. Im kinda worried cuz i transferred an amount of money i had from paypal to my boa account using the wire routing number. Did that on last thursday at 5:17 pm the thing is i still not see the upcomming amount in my boa account. If it’s supposed to be fast, how come i dont see my money yet?. I emailed them and the answer was like ” wait for 4-3 days” its the third day and still not seeing it.. what do u think may be the possible reasons of the delay?

    • Roallin

      PayPal uses ACH payments to tranfer to a bank account. Like the article says, these are paid in batches and can take up to 5 bussiness days to complete.

  • Sam Schmidt

    Thanks for a very concise comparison and contrast of the different methods!

  • mary

    Hey, thanks for this post. I agree that a convenient way for international transactions is so called “third party” providers. I am making international transfers on a regular basis, therefore opening an account for me did not seem as too much hassle. I am using paysera account for that as they usually have a good deal for transfers to my destination. Also there is transferwise for such transfers.
    These ways work better if you transfer money to someone with a bank account.

  • Justin Nahin

    You can use Venmo or Bitcoin. Venmo is great, all free!

  • Rakesh

    Thanks for the informative information. I have question that.. How to use ACH to build service like dwolla?

    Thanks in advance.