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ACH vs. EFT: What’s the Difference?

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Last editedJul 20212 min read

While writing paper checks used to be the gold standard for secure payments, today’s businesses are far more likely to use safe, secure electronic payments. From direct deposit to wire transfers, there are several payment types that fall under the ACH (Automated Clearing House) and EFT (Electronic Fund Transfer) categories.

So, what is the difference between ACH and EFT, and how do these types of electronic transfers work? We’ll cover the key similarities and differences below.

What is EFT?

Short for Electronic Fund Transfer, EFT encompasses a full range of electronic payments. This transfer system involves the movement of funds across a computerized network for a cashless transaction. EFT transfers include everything from online bill payments to direct deposits and ATM withdrawals. It’s an umbrella term that includes, but is not limited to, ACH payments. Rather than manually authorized by bank staff, EFT payments are authorized by pin codes, cards, or secure passwords.

What is ACH?

While EFT is a broad term, ACH is more specific. This system refers to any bank-to-bank transfers sent through the Automated Clearing House network of financial institutions. It takes care of all clearing and settlement issues, enabling electronic transactions within US-based banks and credit unions. Examples of ACH transactions include things like Social Security benefits, auto bill-pay, and payroll direct deposit. Funds are transferred in large batches or groups, which helps keep per-transfer fees low. ACH payments offer a cost-effective way to move funds between bank accounts relatively quickly and efficiently.

What is the difference between ACH and EFT?

When looking at ACH vs. EFT, you’ll see that the main difference boils down to scope. While all ACH transactions also qualify as EFT, not all EFT transfers use the ACH system. EFT includes any money transfers between banks, while also including things like digital wallets and ATM cash withdrawals. The big ACH and EFT difference is that ACH specifically refers to payments sent via Automated Clearing House.

Another ACH and EFT difference involves timing and cost. While all ACH payments are sent in batches, some EFT transactions are individual, which can incur higher fees. This includes wire transfers, which we’ll discuss below.

ACH vs. EFT vs. wire transfers

Like ACH transfers, wire transfers also fall under the wider category of EFT. Wire transfers let you send money to an individual or business anywhere in the world, while ACH payments can only be sent domestically. Funds are wired as an individual transaction in comparison to the batch approach of ACH. This means that your money reaches its intended destination more rapidly, but fees are also higher.

Ultimately, when weighing the pros and cons of ACH vs. EFT vs. wire transfers, you’ll need to think about the urgency of the transaction and compare fees carefully.

Are electronic funds transfers safe?

Sending money as an ACH or EFT transfer cuts down on time and paperwork. They’re certainly convenient, but are electronic funds transfers safe? In short, yes. When you set up any payment, you’ll need to verify your banking details and authorize the transfer. You’ll then receive a notification once the funds have been received at the other end. This makes them trackable and secure.

ACH transfers are only sent through to another account after the user’s details have been verified. Funds are transmitted through the secure ACH network, which links financial institutions across the country without outside interference. The full system is managed by the National Automated Clearing House Association, or NACHA, which manages all administration and ensures secure payment.

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