ACH vs. Wire Transfer – The Difference Between

Understanding the difference between ACH and wire transfer

Two of the most common ways to send money electronically are by ACH (Automated Clearing House) and by wire transfer. The money arrives at its destination a lot faster than in the past when the only way to do so was to send a check in the mail.

Using ACH

A company can really benefit from using ACH for payroll purposes. Most people now prefer to have their paychecks automatically deposited into their bank accounts. Through the Automated Clearing House process large batches of paychecks can be deposited at one time. This is done overnight and eliminates the need for writing out checks and the employees do not have to try to make it to the bank to cash their checks.

ACH is also a way of paying bills and making payments online. It is a secure service that is governed by NACHA (National Automated Clearing House Association). Today this organization is more commonly known as the Electronic Payments Association. The ACH is not permitted to process any transactions that have not been authorized by the account holder.

Using wire transfer

If you prefer a more personalized method of sending money because there is an impersonal tone to online banking, you can take advantage of a wire transfer. This is done from one bank to another but it can also refer to the transfer of cash, such as through Western Union. Wire transfer is the best way of sending money to a person who lives in a different country because email money transfers don’t work in this situation. Both parties must show identification when sending money in this way and this is just one element of the security it offers.

Difference between ACH and wire transfer

The use of ACH for sending money is better suited for large businesses and governments who have large batches of transactions at one time. For personal uses, it is better to use a wire transfer. In this way, ACH is more of a transfer of money between businesses but a wire transfer is a transfer of money between individuals. Both are governed by rules and regulations set down by the banking industry.

There is a risk of fraud in wire transfer, but only if you use it to make an online purchase. In this case it is possible to use false identification or the seller may not send the product that was purchased. There is no such risk involved in ACH.

In order for a business to be able to use ACH for the transfer of funds, the business must first be a member of the ACH network. Any bank can do a wire transfer.