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What Is an ACH Payment vs Wire Transfer?

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Last editedMar 20232 min read

Businesses and consumers have a wealth of payment options available to them, including ACH payments and wire transfers. Both types of payments offer a safe way to send and receive money, but there are certain situations in which it’s a better idea to use one or the other. 

ACH payments, for example, are handled in batches, so they’re often used by employers as a way to pay staff. Wire transfers, on the other hand, are generally individual payments requested by businesses or consumers. In this post, we’ll go into more detail about ACH payment vs wire transfer and discuss which type of payment is best suited to which situation.

What is ACH payment?

ACH stands for automated clearing house, and an ACH payment involves moving money electronically, from bank to bank, via the automated clearing house network (ACH network). ACH transfers can be:

  • Person-to-person payments

  • Bill payments, whether recurring, or on a standalone basis

  • Direct deposits from an employer, or from the government

  • External fund transfers

  • Transfers made via app, for example Facebook, PayPal, Cashapp or Venmo

ACH payments can either push or pull money as required, with transactions submitted to the network in batches. If you’re looking for an ACH solution, GoCardless offers a quick and cost-effective way to take payments directly from your customer’s bank accounts. 

What is a wire transfer?

Wire transfers are direct transfers between two financial institutions. If transfers are sent internationally there could be other intermediaries involved. Sometimes described as remittance transfers, wire transfers are often used for high ticket items, for example, property purchases.

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ACH payment vs wire transfer

Both ACH and wire transfer payments work similarly when it comes to clearance and settlement. They do, however, have different timelines and rules.

  • Wire transfers can clear almost immediately, or take up to one business day, while ACH payments can take anything from a few hours to several business days to be transferred. Wire transfers clear as soon as the receiving bank signs off an incoming message. With ACH transfers, the sender can opt to pay an extra fee for same-day processing. The transaction needs to be initiated, however, within one of three same-day processing windows, or clearance won’t happen until the end of the next business day (for debit transactions) or the day after (for credit transactions).

  • Wire transfers are generally irrevocable, while ACH payments can be reversed. Wire transfers can be cancelled up until they are cleared (which often only takes minutes). Otherwise, there’s little possibility that the payment can be returned. ACH transfers cannot be cancelled. However, they can be disputed and recalled.

  • Wire transfers have a higher cost than ACH payments. ACH payments involve no fee or just a minimal fee with a business incurring a fee from their payment processor or bank. With a wire transfer, consumers have to pay a fee.

  • Wire transfers are usually for one-off transactions, while ACH payments are often used for recurring payments. ACH direct debit payments are an attractive option for collecting regular payments from customers, and can be quickly set up by partnering with a payment processing provider like GoCardless.

  • Wire transfers can be for extremely large amounts (i.e., millions of dollars), while most ACH payments have a cap of less than $25K per transaction

When you’re considering ACH payment vs wire transfer, you’ll need to assess the differences between them. If you’re a business that currently works on a recurring billing model, ACH payments could be your most efficient and cost-effective option.

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